In this overvalued market, it is crucial to find undervalued companies that have potential. Tech stocks are volatile so choose wisely.
The Corona virus has affected the entire world in more ways than we can imagine. A series of events have occurred throughout the world since the beginning of the outbreak.
The most dreadful one was the announcement of the Global recession. Things have been difficult for employees, employers, and investors because this is a very unusual situation where the whole world has been affected at the same time. Events like this do not happen often. And it is safe to assume it has not occurred in the last 50 years.
However, the good thing is that the world is steadily resuming and getting back to its feet. Although many businesses, industries, and the economy are still struggling, some companies are doing better than ever.
In this article, we will be talking about how the overvalued market affects investors.
Overvalued Stock Market
The stock market has become overvalued, mainly because of the unpredictability. However, the stock market was already overvalued to some extent since 2019.
Back then, the U.S had a rising GDP, and there was also an increase in jobs in the market. But there was an increasing trade dispute. These disputes created more uncertainties, and the FEDs were also not going to raise the interest rates soon.
The interest rates were low, and the chances of economic development and growth were high. This further overvalued stock prices. However, the Corona virus was the last trigger.
It created absolute uncertainty in the first half of the year for investors to understand the market since public demand was rapidly shifting to different sides.
The market conditions are still unpredictable, and it is hard to factor in the real value the stock market holds today.
Even big research companies like brownstone research are having a hard time predicting the market, and Jeff’s brownstone research is one of the most accurate financial research firms out there. You can learn more about them from this NoBSIMReviews article on Brownstone Research.
However, some businesses have definitely raised their profits.
The Growth of Tech Companies
The pandemic has caused the world to go on lock down mode, and because of this, more people are now online. Working from home has become the new norm.
Businesses are now conducted online, and all of these things have increased the use of technology, meaning that price and demand for tech stocks have risen significantly in a few months.
The four big tech companies raked in hefty profits during this pandemic are Amazon, Google, Facebook, and Apple.
Amazon made twice the revenue than the last years since we are ordering more and more products by staying at home. Last year it was $2.6 billion, and this year it is $5.2 billion. This also encouraged a lot of people to start freight businesses.
Facebook’s primary earrings source is the ad revenue, and it performed well, thanks. Thanks to our endless scrolling, Facebook’s revenue rose to $18.7 billion.
Even YouTube did well despite there being a decreased rate of spending on advertisements.
Zoom was also this year’s most prominent video conferencing software. Almost every business and educational institute has used zoom for multiple reasons.
Ridesharing apps & the entire industry declined drastically but are slowly making a comeback.
Hand Sanitizers & Health Care Products
You do not even need to know about the stock market to understand why hand sanitizers and other health care products have become so popular.
Hand sanitizer manufacturers all over the world have massively benefited during the pandemic. The product is also diversified. You have mini bottles, sachets, bars, and the popular kiosks for high traffic areas.
The private company Terraboost has installed an impressive 90,000 kiosks around the U.S and expects it to be 150,000 soon. They increased their production significantly just to meet customer demand.
Supermarkets Surprising Growth
A lot of restaurants are still closed. As for the open ones, they are not getting many customers. The fear of eating in a crowd has led people to buy from supermarkets in bulk.
People also prefer to cook for themselves during lockdowns to delve into more home time. Our social media news feed was full of pictures of videos of new and amateur cooks trying their best to be creative.
The supermarkets also did not have to use discounts or promotional offers to attract this massive customer base. People did it on their own out of necessity and fear.
The Dilemma of Uncertainty
Like we said earlier, not all companies are down for the count. The US economy indeed decreased by 32%, which is worse than the previous 70 years.
There are the industries mentioned above that are thriving due to market uncertainty. Tech stocks are still volatile despite their drastic upgrade in the market.
When giants like Pepsi and General Motors are struggling to stay in the market, you know how difficult it is.
The tech stocks can also turn out to be value traps.
The real dilemma is choosing the right company. Big tech companies have a good track record, but the stock prices are incredibly high.
Then, small companies can give you a hefty return on investment in a short time.
Due to increased demand, plenty of small businesses and companies are rising. That means investing in them may be a good idea, but it is still uncertain if they will last long.
Finding the Right Value
It is crucial to find companies that are now in an undervalued state compared to their fair values.
Also, try to avoid companies with immense debts and high promoter share despite having volumes of trade and low valuations.
Despite the uncertainty, follow the basics of investment. Take a company from any of the industries mentioned above or FMCG, garments, and power. Look at their current shares and compare it with their previous price to earnings ratio to make an informative decision. You can also be a part of the momentum trade or just buy tech stocks and hope it goes well for you.