Hello, Reader.
Popular opinion can be toxic to your portfolio, but it can also be your portfolio’s best friend. The choice is yours.
Blindly trusting the crowd is toxic because it tends to rely on linear projections. It expects yesterday’s trends to become tomorrow’s trends as well.
Unfortunately, the linear thinking that supports popular opinion lacks perspective and repels the kind of forward thinking that can uncover valuable insights. It can also be deadly for your portfolio.
That’s why most successful investors dismiss popular opinion as a non-starter. Instead, they seek to identify the data points that are nudging current trends into an entirely new direction.
To be sure, going against the grain can be emotionally challenging, but not as emotionally challenging as going with the grain in a losing position.
Back in 2001, for example, Wall Street analysts were gushing about a high-flying energy company named Enron Corp. In October of that year, all 15 analysts tracked by Thomson First Call, an investment research and data service, rated Enron a “Buy.” Twelve of the 15 called it a “strong buy.”
Less than three months later, Enron declared bankruptcy.
All along Enron’s descent into disaster and infamy, Wall Street analysts and the financial media lavished praise on the “innovative” company.
Forbes, which compared Enron to Elvis Presley in an April 2000 puff piece, returned to the newsstands in August 2021 with a fitting follow-up. The esteemed financial journal wrote…
Enron has grown into the world’s largest electricity marketer since we last wrote about it. Now a new surge in revenues might be in the offing.
According to the most prominent voices in the financial press and on Wall Street, Enron could do no wrong. And yet, within months of their misguided high-fives, the company became the largest bankruptcy in American history, up to that moment.
Meanwhile, at the same time, very few of these voices offered any kind words for an e-commerce upstart named Amazon.com Inc. (AMZN).
The January 2000 issue of Wired magazine featured this headline: “Analysts Send Amazon Down River.” The story that followed quoted several Wall Street analysts offering skeptical opinions about Amazon.
Despite Amazon skeptics, however, the e-commerce giant would survive to become one of the greatest success stories – and greatest stocks – of the last 20 years. In other words, the popular opinion in 2000 and 2001 suffered from double myopia – blindly bullish on Enron and blindly bearish on Amazon.
Today, Amazon has far surpassed those ill-fated popular predictions. It’s now a leading figure in cloud computing and, by extension, artificial intelligence. Earlier this month, Amazon revealed that its Amazon Web Services segment earned $9.3 billion in operating income – a 35% margin. As one of the top five cloud providers, it’s part of a strong group that makes up over 80% of the market.
Moving from these past examples to the present moment, I currently recommend several stocks that popular opinion is rejecting in my Fry’s Investment Report portfolio.
I have learned from long experience that challenging popular opinion often leads to investment opportunity. By doing so, you open the door to identifying trends that are early in their development – before they have influenced share prices in a significant way.
If you’re interested in my “contrarian” recommendations, click here to become a member of Fry’s Investment Report today.
Now, let’s take a look back at what we covered here at Smart Money in the past week…
Smart Money Roundup
What to Do When the Stock Market Drops
When the market takes a nosedive, there are some things you should do. There are also some things you absolutely, positively should not do. And we can learn a lot by looking at one of the biggest business stories of the past 100 years: Amazon.com Inc. (AMZN). Recessions, bear markets, and stock market corrections made a lot of headlines but proved to be tiny speedbumps on Amazon’s path to success. To read more about the importance of persevering American innovation, click here.
Despite Bumps, the Road to AGI Remains Intact
Last Monday, prices of the Tokyo Stock Exchange’s Nikkei index fell 12%, and European and American stocks followed suit. The tech-heavy Nasdaq-100 opened 7% lower, driven by a selloff in everything from AI players to Bitcoin miners. At first glance, it seems like the whole road to artificial general intelligence (AGI) is falling apart. Continue reading to find out why that is certainly not the case.
AI Stocks: Seize the Ultimate Opportunity Amid a Market Selloff
AI stocks have been the hottest trade on Wall Street since ChatGPT’s launch in late 2022. However, over the past few weeks, they’ve suffered through their worst crash since the AI bull market began, leading some to question whether the AI bubble has popped. But because of the spate of AI companies’ corporate earnings released last week, Luke Lango believes that it decidedly has not. Click here to continue reading Sunday’s Special Guest Issue.
Looking Forward
As we close out today’s Smart Money Roundup on the topic of popular opinion, it’s worth mentioning one of the most popular trends today: AI.
Artificial intelligence isn’t going away any time soon. In fact, it’s on the verge of a major transformation. So, it’s crucial to have strategies in place for investing in a constantly changing landscape.
I’ve been talking here for a while about the next step in AI’s near future, artificial general intelligence (AGI) – a hyperaware version of AI capable of “generalized” cognitive abilities, potentially achieving superhuman cognition.
To help navigate the “Road to AGI” and its implications for investors, I’m holding a special event next week. I am also releasing a series of special reports for members of my elite trading service, The Speculator.
In the meantime, stay tuned for this week’s Smart Money issues, where we will continue to prepare for the road to AGI.
Regards,
Eric Fry
P.S. I want to know what you think. What do you want to see me talk about during that presentation? What do you know about AGI… and what do you want to know more about? You can send your feedback to ericfryfeedback@investorplace.com.
