How to Profit From What Billionaires Are Telling Us About the Market Right Now

Tech Stocks on the Rise

It’s an uncomfortable fact of the stock market that the fortunes of Wall Street aren’t always reflected on Main Street. Put differently, just because personal wealth, employment, or finances across the country may be in shambles, that doesn’t necessarily mean the stock market is feeling the same kind of pinch.

That’s been true of the past, oh, 40 years or so, and it’s still true today, as top tech stocks continue to dominate and see enormous gains.

Here’s an easy way to tell how the stock market is doing: are billionaires seeing their personal wealth continue to swell? If so, that more than likely means the stock market is doing just fine, or at the very least, that select stocks are doing well.

Despite millions of people across America and around the world struggling with unemployment, making rent, food insecurity, and a general onslaught of heartbreak and devastation brought on by the COVID-19 economic downturn, stocks haven’t really been hit all that bad.

Sure, stock prices took a big dive at the beginning of the coronavirus panic, but they quickly recovered, even if Main Street is still very much caught in the throes of the disease.

When the dust settled, investors and Wall Street quickly adapted to the “new normal” and saw that, in fact, most tech stocks were still looking very impressive for the long term. And, as is always the case, that realization was quickly followed by capital, even while so many people remain desperate across the country.

I can’t change the unfortunate makeup of the economy; instead, in this column I’m going to discuss how you, dear reader, can keep up with the billionaires so at least they’re not the only ones seeing gains.

While economic forecasts remain grim, several billionaires have seen enormous gains via their holdings during this crisis. A group of 10 such billionaires added about $23.0 billion to their fortunes in early June, due in large part to tech stocks continuing to outpace the dark tidings.

So, with that bit of grim news out of the way, let’s take a look at the billionaires who have seen huge gains over the past few months, and what that tells us about the top tech stocks to invest in.

NKLA Stock

Chart courtesy of StockCharts.com

The biggest surprise was a tech stock that, despite the economy experiencing perhaps the longest period of economic uncertainty since the Great Depression, was able to see over 500% gains in the span of a few months.

The tech stock in question is Nikola Corporation (NASDAQ:NKLA). NKLA stock has seen astounding gains during the coronavirus pandemic. The Phoenix-based hybrid truck company skyrocketed off some good news; it’s set to deliver $10.0 billion in truck sales next year. (Source: “Despite Market Plunge, These 10 Billionaires Gained $23 Billion This Week,” Forbes, June 13, 2020.)

Trevor Milton, the founder and chairman of Nikola Corporation, was able to ride that high to become a newly minted billionaire. Nikola stock, meanwhile, is a perfect example of something I’ve been predicting for a while now.

Namely, there is a huge market appetite for companies that could replicate the success seen by emergent industry pioneers like Tesla Inc (NASDAQ:TSLA).

Heck, the two companies are both named after the same guy (Nikola Tesla). If they ever decide to merge, it wouldn’t be hard to think of a name.

NKLA stock hit the market with a $12.0-billion market cap, about four times its last private valuation. Again, all these numbers speak to an investor optimism that clearly is unconcerned about the long-term impact of COVID-19.

And, much like other young tech companies, despite boasting impressive sales numbers, Nikola doesn’t project to make a lick of profit in 2020. Still, that didn’t stop the market furor from creating not one, but two billionaires, as CEO Mark Russell also saw his personal wealth greatly expand over the past few weeks.

While we’re on the subject of Tesla…

Tesla Stock

Chart courtesy of StockCharts.com

Tesla Inc was another company that saw its founder, Elon Musk, grow his billion-dollar-plus wealth during the COVID-19 economic downturn.

Tesla stock hit an all-time high during the coronavirus panic, and it’s easy to see why: the company was already on a huge roll in 2020. The fact that the economy halted for long periods did little to suspend the massive swell of support building behind the electric vehicle stock.

The industry progenitor is always swimming in capital, and TSLA stock has been among the top tech stock in 2020, outperforming even some of the most optimistic expectations.

To be fair, both Tesla and Nikola have huge potential. Yes, to a certain degree right now, both companies are selling dreams and promises. But the market is wide open and has huge potential.

According to a UN report, investment in new renewable energy capacity (not including large hydro) from 2010 to 2019 was estimated at $2.6 trillion. (Source: “Global Trends in Renewable Energy Investment 2019,” United Nations Environment Programme, last accessed July 2, 2020.)

That’s more than three times the amount invested in the previous decade. It’s a number that is only expected to grow as the fight against climate change continues to gain traction both politically and socially.

A report by BloombergNEF, meanwhile, showed that investments in clean energy have been massive, totaling $332.1 billion in 2018. (Source: “Clean Energy Investment Exceeded $300 Billion Once Again in 2018,” BloombergNEF, January 16, 2019.)

So there are some definite hard numbers that back up the optimism behind these stocks. As such, I believe that they are top tech stocks. In fact, in 2020, I think it’d be hard to find two better tech companies.

Amazon Stock

Chart courtesy of StockCharts.com

Of course, the world’s richest man was not to be left out of the fun.

Jeff Bezos has seen his personal wealth grow as Amazon.com, Inc (NASDAQ:AMZN) achieved stock gains of over 50% year-to-date.

Honestly, you don’t need an advanced degree in economics to figure this one out: people are stuck inside at home, bored, with few places left open at which to spend their cash.

Add the fact that many people are scared to leave their houses anyway, lest they run into the disease, and you have a perfect storm for Amazon stock.

Amazon.com would be the first place you’d expect to see huge gains during a calamity like this, and intuitive thinking in this case is right on the money.

Compared to the other two stocks I’ve discussed above, AMZN stock probably has the lowest ceiling ahead of it. It’s doubtful that the stock will be able to see hundreds of percentage points of gains within a year.

Having said that, Amazon stock is as stable as it gets, with huge gains likely on the way as a result of the coronavirus lockdown—especially since it appears that the lockdown will be partially in place for the whole summer (if not longer).

In other words, Amazon is in the right business at the right time, and is seeing huge gains as a result. AMZN stock is expensive, but even owning just one share could bring pretty healthy gains to an investor who wants something with a little less volatility.

NKLA stock and TSLA stock, on the other hand, are likely going to be subjected to corrections, peaks, and troughs (Tesla stock has already had its fair share over the years).

So, while my long-term outlook on these three companies is positive, those who are unsure if they want to wade through the ups and downs may be better served by investing in safer, steadier stocks like Amazon, even if the potential for gains is relatively less.

Analyst Take

Here’s the thing: as of February 2018, about 84% of American-owned shares were held by the wealthiest 10% of households. (Source: “We All Have a Stake in the Stock Market, Right? Guess Again,” The New York Times, February 8, 2018.)

What this means is that what’s affecting everyday Americans often has little impact on the stock market, and vice versa. So when unemployment numbers rise or food bank lines extend around the block, those horrors are more often than not contained to Main Street.

That being said, there’s a way that smaller investors can get their piece of the pie: by following the market closely and not getting distracted by hype.

Billionaires are a great example of the disconnect between Wall Street and broader economy. Following their investment portfolios’ dips and falls is, frankly, a better predictor of stock market trends than unemployment figures are.

Right now, many billionaires are showing us how to profit from the current economic climate: tech stocks.

The top tech stocks have seen enormous gains over the past few months and show little sign of slowing down. NKLA stock, AMZN stock, and TSLA stock are all well suited to see big jumps throughout the remainder of 2020 and beyond.

As such, while you may not have the capital that billionaires do, it doesn’t mean you can’t also make money from the stock market. As I explained above, there are many opportunities for gains in 2020 yet.