My #1 Tool to Translate Tech Hype into Maximum Profits
By Lou Basenese Tuesday, January 12, 2021 Last week,
I told you to ignore all the hype coming out of the Consumer Electronics Show (CES).
When it comes to finding compelling technology investments, it's a waste of time.
Instead, we should focus on patent filings (
here's a refresher on why), and on Gartner's Hype Cycle for Emerging Technologies.
Now, if you don't have a clue about Gartner's Hype Cycle, you need to get one! Why?
Because it's one of the simplest, most powerful tools for pinpointing the next profit opportunity in tech stocks. I've been using it for over a decade to find the market's next 200% to 1,000% gainers.
Today, I'm going to give you a down-and-dirty overview of how to put this tool to work.
So let's get to it…
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Good for Enterprise and Investors! Every summer since 1995, top tech research firm Gartner has released its
Hype Cycle for Emerging Technologies.
Per Gartner's own billing, the report:
"Garners insights from more than 1,700 technologies into a succinct set of 30 emerging technologies and trends. This Hype Cycle specifically focuses on the set of technologies that show promise in delivering a high degree of competitive advantage over the next five to 10 years." Put simply, the report separates the hype from the reality for every technology trend in existence.
Gartner's aim? To help enterprises decide whether it's time to adopt a new technology.
But if enterprises use it to time their adoption, it stands to reason that
we can use it, too.
After all, the more companies that adopt a technology, the more sales and profits there will be for the providers of that technology. And, ultimately, that leads to higher share prices.
Understandably, Gartner charges a pretty penny to access its insights each year.
But we don't have to pay a dime.
The most critical information in the report can be boiled down to a single graphic.
And thanks to Google Search, we can view it for free simply by searching for "
Gartner hype cycle for emerging technologies 2020."
(God bless the internet! At least in this case.)
And now, so you can clearly see all the stages of tech adoption, here's the Hype Cycle without any technologies listed.
(Please note: Gartner was not in any way involved with the creation of this chart.) As you can see, the graphic tracks the progress of a particular technology through five distinct phases:
- Technology Trigger: Consider this the "Adam and Eve" moment. Essentially, it's when the technology is created, and the first prototypes come onto the scene. At this point, though, most technologies remain stuck in the lab, with no commercial applications available.
- Peak of Inflated Expectations: After the trigger, early adopters come along, and initial products enter a validation phase. Any success stories prove a breeding ground for increased enthusiasm and interest. Some companies adopt the technologies, but many others take a "wait and see" approach.
- Trough of Disillusionment: This phase is characterized by increasing skepticism over the long-term prospects for the technology. During this period, companies work hard to improve their products and address key concerns from early adopters. This is when work begins on perfecting the technology for primetime.
- Slope of Enlightenment: As second- and third-generation products are introduced, more companies recognize the merits of the respective technology. Adoption increases, although the most conservative companies still wait.
- Plateau of Productivity: During this phase, mainstream adoption takes off. This is when the companies behind the technologies begin to enjoy steady, above average, and more predictable sales growth.
As investors, the Hype Cycle proves invaluable, because the nature of each phase helps us identify two distinct buying opportunities and one undeniable "Danger Zone."
When to Buy… And When to Sell The first buying opportunity materializes in the middle of Phase 1 up to the middle of Phase 2. The companies in this bucket tend to be emerging growth micro- and small-cap companies.
Translation: Higher risk, but
way higher reward.
The second buying opportunity materializes during Phase 4. The companies in this bucket tend to be small- and mid-cap first movers, with established sales. As a result, they're able to reveal more about future growth as mainstream adoption takes off.
As for the Danger Zone phase, we want to avoid technologies when they reach the Peak of Inflated Expectations. Or, more simply, when the hype hits fever pitch levels.
Why? Because the massive hype undoubtedly precedes a nasty fall — in interest, adoption, and stock prices. And we don't want to stick around for that.
What's the Hype Cycle Telling Us Right Now? Like any indicator, hype cycles don't offer a crystal ball. So they'll never be 100% accurate.
In addition, Gartner only releases its Hype Cycle for Emerging Technologies once a year.
But fear not! Thanks to the powers of the internet and Google, we can construct our
own hype cycles — and we can do it in real-time.
Tune in on Thursday and I'll show you exactly how.
I'll also share a specific emerging technology that's in the Danger Zone. Despite the fact that all your friends and family members are probably buying it right now.
Stay tuned!
Ahead of the tape,
Lou Basenese
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