Thursday, July 28, 2022
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Sample Newsletter-2

Pandemic winners tired of winning
George Michael falling asleep in Arrested Development

Arrested Development/Fox via Giphy

Companies that thought they had taken the Limitless drug during the height of the pandemic are beginning to realize it was just a placebo.Roku plunged 22% in its worst trading day since 2018, as investors punished the streaming service for disappointing Q4 numbers and a gloomier-than-expected outlook for the current quarter.After a nearly 150% rise in 2020, shares are now down more than 75% from their July 2021 peak.Roku is one of many companies whose epic rise in 2020 has been overshadowed by an equally epic collapse in the last year:Shopify, which represented the Covid e-commerce boom, is down 62% from its peak.Roblox, which represented the Covid gaming boom, is down 63%.Netflix, which represented the Covid streaming boom, is down 43%.One might even suggest that the companies billed as pandemic winners are not only not winners, they are also losers. Their conviction that consumer behavior would be forever changed by Covid led them to make poor decisions that dented future prospects.Not to pick on Peloton, but let’s pick on Peloton. In May 2021, the company announced plans to build a $400 million factory in Ohio to fill the insatiable appetite for at-home workout equipment. 2,800 job cuts, an 82% stock plunge, and one CEO later, it decided to scrap that idea. “To meet market demand we scaled our operations too rapidly and we overinvested in some areas of our business,” former boss John Foley said on his way out.But it’s not just consumer behaviors that reverted back to normal. These growth stocks also benefited from an era of super-low interest rates from the Fed—which is all but certain to evaporate this year due to soaring inflation.Looking ahead…many of these companies still have their believers, such as Ark Invest’s Cathie Wood, who argue innovative tech firms are stuck in a temporary rough patch before they realize their long-term potential. Just “give us five years,” Wood said this week.—NF


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