What happened
On the first trading day of 2022, stock market indexes were sporting respectable gains. The S&P 500 was up 0.19% as of 1:05 p.m. ET, and the Nasdaq-100 was up 0.71%. However, not all stocks started the new year on the right foot. High-growth but richly valued names took a tumble, continuing the volatility they experienced last year. A sampling of top tech companies tells the story.
|
Company |
Daily Performance (as of 1:05 p.m. ET) |
|---|---|
|
CrowdStrike Holdings (CRWD +0.88%) |
(4.4%) |
|
Datadog (DDOG +1.80%) |
(7.9%) |
|
HubSpot (HUBS +2.12%) |
(8.3%) |
|
MongoDB (MDB +2.37%) |
(10%) |
Data source: YCharts.
Image source: Getty Images.
So what
Though the new year has started and many high-growth-oriented investors are looking to turn over a new leaf after a brutal 2021, there was no news from any of the above mentioned companies. Thus, some of the volatility that affected these stocks in late November and December is continuing, including the expectation for higher interest rates (which lowers the value of expected future cash flows, and can put downward pressure on stock price).
Now what
Investing in the fastest growing businesses on the market doesn't equate to higher stock prices in the short term. On the contrary, with high expectations already cooked into the company's valuation, above-average volatility should be expected.
However, it's undeniable that CrowdStrike, Datadog, HubSpot, and MongoDB are expanding at a rapid pace and still have plenty of opportunity ahead of them. And excluding CrowdStrike, each of these particular stocks outperformed the S&P 500 last year, so a little sell-off isn't out of the ordinary.
Stay focused on this long-term potential, and invest in a measured way (like regularly purchasing more of your favorites on a monthly or quarterly basis). Sooner or later, market sentiment will change for these richly valued shares, perhaps during the next quarterly earnings season, which begins in late January.
