The NASDAQ hit a new high two weeks ago, showing few signs of slowing down.
As of its close two Fridays ago, the tech index has soared by almost 130% since hitting its pandemic-driven low in March last year.
The remarkable surge in stock prices is not without merit.
Technology companies were among the main beneficiaries since the start of the pandemic as scores of the world’s population moved online.
Amid the rising share prices, you would not be wrong in thinking that the number of investment opportunities has dried up.
Yet, I would argue that there are still opportunities out there.
All you need is a little bit of patience — and a long-term view.
Skewed expectations
As the COVID-19 virus spread worldwide, a select group of companies found themselves in the right place at the right time.
Take Zoom Video Communications (NASDAQ: ZM), the poster child for the COVID-19 driven online boom.
For its fiscal year ended 31 January 2021 (FY2021), Zoom’s revenue more than quadrupled to US$2.7 billion as the number of customers soared almost six-fold.
More importantly, the firm’s free cash flow ballooned from less than US$114 million to almost US$1.4 billion, demonstrating the high profitability of its franchise.
As we enter the final stretch of 2021, the rapid rise in Zoom users is starting to slow down as the initial online rush starts to taper off.
As such, we should not expect a repeat of what we saw in 2020.
Having said that, you’ll be mistaken if you think that growth is over for the internet economy.
Livin’ in 2030
Shopify (NYSE: SHOP) believes that 2020 has accelerated e-commerce adoption by 10 years.
In short, the internet world “became 2030 overnight”.
Thing is, not every company out there has made a 10-year leap in their technology adoption.
In fact, the real work of digitalising work processes could be still in its infancy.
For instance, Microsoft (NASDAQ: MSFT) reported a 21% growth in revenue for its latest fiscal quarter, an acceleration from its previous two quarters.
The Redmond-based company’s growth is nothing short of astonishing, given that it generated US$168 billion in revenue in its latest fiscal year.
Meanwhile, at The Smart All Stars Portfolio, we recently celebrated our first multi-bagger stock (that’s a stock which is up 100% or more), the first of many that we expect to see in the coming years.
And growth is far from over, according to Microsoft CEO Satya Nadella.
Doubling in 10 years
Over the next 10 years, Nadella believes that the amount of money spent on tech will increase from five percent of the world’s gross domestic product to over 10%.
Along with it, there is fertile ground for more stock winners to be found.
My own experience informs me that winning stocks can be found even during bull markets.
Over the past 14 years, I have been a fortunate owner of huge winners such as Netflix (NASDAQ: NFLX), Chipotle Mexican Grill (NYSE: CMG), Amazon.com (NASDAQ: AMZN), Apple (NASDAQ: AAPL) and Mercado Libre (NASDAQ: MELI).
But here’s something you might not know.
None of the stocks above were bought during the downturn in 2008 and 2009.
Source: Yahoo Finance; stock returns in rounded multiples.
In fact, all of my stocks that delivered 10x returns or more were bought during times when the stock market had already recovered, much like where we are today.
The difference, of course, is that these gains will take years and not months.
Get Smart: Your last remaining advantage
As the Collaborative Fund’s Morgan Housel once said, your last remaining advantage as an individual investor is your patience.
How true.
As a Smart Investor, you do not need to cling to every word the US Fed Reserve utters.
Nor do you need to react to any random billionaire’s tweetstorm.
Instead, what you do need to do is focus on the business.
And above all, have the patience to hold your best stock ideas to fruition.
Like a patient farmer, you wouldn’t check your seeds every day to see if they have grown each day.
As a Smart Investor, you need to have the audacity to do nothing as your stocks gyrate day after day.
That’s because, from my experience, what matters in the end is not how good you swing in and out of markets.
I can say, first hand, that it is your patience that will outlast the short term worries and make a pleasing mockery of short-term share price movements.
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Disclosure: Chin Hui Leong owns shares of Shopify, Microsoft, Zoom, Apple, Amazon, Netflix, Chipotle Mexican Grill and Mercado Libre.
