HomeBusinessWhy trends are so intoxicating for investors – and dangerous: Morning Brief

Why trends are so intoxicating for investors – and dangerous: Morning Brief

This is The Takeaway from today’s Morning Brief, that’s possible to register to receive in your inbox every morning, along with:

Shares of Roblox plummeted yesterday after the gaming platform company issued disappointing booking guidance.

You would never know Roblox isn’t doing well in my house. My teen and tweenager bounce between games like Blox Fruits and Pet Simulator , owned by Epic Games).

On the other hand, the majority of people reading this are about to Google “what is Roblox” like they do every quarter before they forget. (It is an online gaming platform where users can build and play games.)

Roblox (RBLX) didn’t go public until 2021, and the stock has fallen from a high above $130 per share in November of that year to around $30 now. That’s because annual sales growth has moderated to the mid-20s.

It feels like the jury is still out on whether the Roblox craze will be a flash in the pan or a lasting trend. As an investor, it is tempting to buy what you know, as Warren Buffett once said. And when it comes to trends that we regularly interact with, see and assess, we develop opinions.

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But what if the trend you know turns out to be just a fad?

There have been a few high-profile examples lately. Take Peloton (PTON), that pandemic-era darling that might go the way of Jazzercise or Tae Bo (Google it, kids). That stock’s collapse makes Roblox’s stock look like it’s on a gentle decline, from a closing high of $162.72 two days before Christmas 2020 to just above $4 now — a 97% drop. There is a good thing somewhere, as we wrote in this newsletter, but somewhere the order of magnitude was misunderstood.

Or consider Beyond Meat (BYND), whose shares are down about the same amount since the record it set during the height of the 2019 grilling season. Shares of the plant-based meat maker tumbled yesterday after experiencing its eighth straight quarter of decline year noted. sales for the year.

Compensating for the expensive exercise bike that now functions as a clothes hanger, or the abundance of fake meat in the supermarket freezer, are the initially questionable proposals that eventually became integrated into our lives.

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The once ridiculed AirPods. Uber, which has faced backlash from both taxi drivers and passengers — not to mention outrage over revelations that it tracked users after they exited vehicles. Or Airbnb: do you want to rent your house to strangers?

Distinguishing between a fad and a more permanent part of our economy seems like a zero-sum game. And in retrospect you can see why things worked. Apple forced adoption by giving its users an ultimatum: cut the cord or buy an Android. Uber used a VC war chest to subsidize its path to adoption, aided by a good idea that users liked and actually found useful. Airbnb ultimately created a new kind of real estate investment on the supply side, and a smoother experience than renting a house or apartment on the demand side.

And certainly, Peloton can keep up with its core user base. I still buy Beyond Meat burgers every now and then. The companies continue to exist. But for investors, the trend is either sustainable or perhaps not at all.

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So check back in a few years to see if Robux is still on the gift list – or if the next generation of kids has sustainably replaced mine by playing Adopt Me or one of the other tens of millions of games on the Roblox platform.

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays from 9:00 AM to 11:00 AM ET. Follow her on Twitter @juleshymanAnd read her other stories.

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