The Nasdaq 100 (^NDX) is home to some of the biggest success stories in tech and growth investing. However, certain stocks in the index face challenges like profitability concerns, rising costs, or shifts in market trends.
While profitability is essential, it doesn’t guarantee long-term success. Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
Semiconductors are the silicon backbone of the digital revolution. Demand for chips is variable though, meaning that corporate inventory levels and sentiment can significantly impact the industry. Uncertainty surrounding these factors has hurt semiconductor stocks over the past six months as they have pulled back by 17%. This drawdown was noticeably worse than the S&P 500’s 1.7% fall.
A cash-heavy balance sheet is often a sign of strength, but not always. Some companies avoid debt because they have weak business models, limited expansion opportunities, or inconsistent cash flow.
A company with profits isn’t always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential.
Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
Growth boosts valuation multiples, but it doesn’t always last forever. Companies that cannot maintain it are often penalized with large declines in market value, a lesson ingrained in investors who lost money in tech stocks during 2022.
Running at a loss can be a red flag. Many of these businesses face mounting challenges as competition increases and funding becomes harder to secure.
A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
