Humpty-Dumpty Stock Market

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Dear fellow investors,

The era of the dynamic sales growth tech company, with a religious quality to its leadership, appears to be over. Who are these mega-dynamic leaders? What was the key to their extended success in business and the stock market? How long will it be before these former powerhouse stocks get interesting again? In other words, when will Humpty-Dumpy get put back together again?

The period from 2014 to 2020 was dominated by the stock market success of the FAANG stocks. These technology companies were heavily promoted by charismatic leaders like Mark Zuckerberg, Jeff Bezos, Tim Cook, Reid Hastings and Sundar Pichai. They laid out aggressive revenue growth targets and hit them. In the process, they developed a cult-like following of growth stock and passive investors.

These men brilliantly established the rules of the game they played. Zuckerberg (in social media by way of a Harvard dorm), Bezos (by way of DE Shaw’s hedge fund), and Reid Hastings (the Pied Piper of movies by mail) seized the era and never made any effort to temper the dreams of cult-like investors who enjoyed their products. Humpty-Dumpty never had a great fall.

Antitrust laws existed, but none were used on their monopoly positions. Second, revenue growth was the key benchmark, rather than profitability. Third, the more growth targets they hit the more devotion they received from investors.

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