How to Profit From the “Cycle of Hype”

Lose your shirt in 3D printing stocks this year? Don’t kick yourself. You’re not alone. (Okay, kick yourself a little if it’ll make you feel better.)

Today I’m going to tell you how to make sure you don’t lose your 3D-printed shirt in the next tech craze. Because mark my words – there will be a next time.

And as you’ll also see, it could soon be time to get back in on one 3D printing stock.

Look, it’s really not your fault if you got taken for a ride on 3D stocks. These guys really chatted themselves up. 3D print a new car? Sure. Claim that every home would have a 3D printer in just a few years? Why not? (Don’t rat me out, but I have plans to print a new boss. I’ve already got the template picked out).

However, most industry experts claim consumer 3D printing is at least five years away from mainstream adoption. Others believe it will take even longer for these machines to attract ordinary consumers.

Of course, these 3D printing startups were too busy cashing in to worry about meeting expectations. So when these stocks hit the skids just a few months ago, plenty of investors were stuck wondering what the hell happened.

And of course, the financial media had guzzled the Kool-Aid, no questions asked. 3D printers were THE next thing. So you bought. I don’t blame you.

So here’s the deal…

Hot stocks—especially in the technology sector—are at the mercy of a vicious hype cycle.

This hype cycle pumps up a stock or sector to outrageous levels way before it can deliver on its promises. And it crashes these same stocks hard once the expectations get out of control. And as I explained back in January (when the hype surrounding the industry was nearing its peak), 3D printing stocks are the perfect example.

Think of the late ‘90s. Do the words dot-com mean anything to you? They still give investors a serious case of the willies.

And if you want to avoid another tech train wreck, I suggest you bone up on the hype cycle.

See, the royal road to mastering tech stocks like the 3D printers is to understand the cycles of hysteria and the mass mind of the investing herd. If you don’t, you’ll get stampeded every time (no mixing metaphors here at the Rude). Learn this cycle, and you’ll be rewarded handsomely.

Here’s the Gartner Hype Cycle. Study this chart…

RUD_10-24-14_Expectations

This is the cycle of hype most new technologies go through. You can see where the 3D printing stocks peaked in January. Now that the dumb money has been shaken out, we could be nearing the “Trough of Disillusionment.” The market can then begin to climb the “Slope of Enlightenment.” That’s because the industry pretenders get exposed, leaving only the strong horses with real businesses. Realistic expectations can begin to emerge–and the thoroughbreds are left standing.

The length of the complete cycle varies, of course. But you can count on this— the basic pattern is the same. Use it as your trading guide.

Sure enough, since I told you in January that 3D printer stocks were hitting peak hysteria, many of them have fallen off a cliff. Industry superstar 3D Systems Corp. (NYSE:DDD) is down nearly 60% on the year after being one of the best performing stocks in 2013…

RUD_10-24-14_3DSystems

The “trough of disillusionment” will eventually come for these stocks. Heck, you might even get the chance to buy DDD back one day. But for now, the hype has left the building.

Regards,

Greg Guenthner
for The Daily Reckoning

PS:Sign up for the Rude Awakening for FREE today to see how you can trade this trend for huge gains…