The growth in technology has led to the shrinking of it. It seems that every day, engineers find a way to get more functions from ever-smaller products.
The course from UNIVAC to a smartphone has been long, but it has brought us to a point where technology can go literally anywhere that we go, providing information, communication, entertainment, and much more. These compact, powerful devices of all kinds are now integrating themselves literally onto our bodies, carried as accessories or even as part of our apparel to provide those functions for us.
These exciting new products get lots of buzz from users, but the market response has been slightly more measured. Investors understand the mercurial nature of new tech, and they’re reluctant to bid up unproven ideas, even as consumers initially flock to them.
An easy place to see that is with NASDAQ GPRO. Only on the exchange since 2014, it has shown growth but also reflects the reluctance of investors to go all-in on a product that may yet prove to be a fad.
Will POV video from skiers and divers end up having a sustainable demand, or will it eventually become passe? Time will tell, of course, but for the investor considering a stock like GPRO, there are some litmus tests for whether you are ready to try it on.
Timing
Fads can be profitable for investors who are willing to take a chance. A wild surge in stock value can follow the big splash of a new product offering, but if a glitch emerges or the consumer is nonchalant, the ensuing crash can be catastrophic.
Investing in a company with trendy new products requires that you first decide how you want to time things. Do you want to roll the dice on short-term gains and exit before the bubble bursts? Or do you want to swoop in after the dust settles and get a bargain that may recover and generate some long-term results?
It depends largely on your time horizon, of course; long-term instruments are not the best choice when you’re close to retirement. And short-term gambles may be risky if you still have a mortgage, kids at home, and student loans. Knowing where you are and the ramifications of your position on your optimum investment strategy are critical.
Business Strategy
Many great products have crashed due to bad strategies. The annals of business history are littered with them. That’s why a real understanding of the inner workings of a company is essential before investing with them.
Most wearable technology companies, in their very DNA, are cutting-edge. They have developed new technology that has captured the imagination of millions, and the desire to continue stoking this fire is keeping them at the forefront of the industry. Long-term, it would appear that their course will remain strong.
Other companies haven’t been so savvy. Many CEOs, managers, and owners at every size business have laughed off competition and innovation, smugly sticking to the status quo as the world surges forward without them.
X-Factors
There are unique circumstances in every industry that can affect their long-term profitability. For example, government regulation may ultimately threaten the durability of the e-cigarette industry, which emerged and grew so quickly that science could not keep up. As more research is completed, there could be safety and health issues that would prove costly for the companies.
Product liability is another one. Properly used, GoPro products don’t pose any kind of threat, but the potential of risky behaviors undertaken by GoPro users, especially young ones, could have negative repercussions. And the viewing range of the cameras may capture images that could become an invasion of privacy.
Wearable technology is a fast-moving field with many questions still unanswered. To the cautious investor, that alone is justification enough to be guarded. But with the right combination of timing, company characteristics, and outside influences, the industry as a whole stands to deliver long-term positive results.
