Motley Fool’s “The 4 Stocks We Believe Are Poised To Dominate The Virtual Reality Market”

This article was originally published on May 23. It has not been updated or revised, other than to update my disclosure and ownership stakes.

We haven’t seen many big new teaser ad pushes from the Motley Fool Stock Advisor lately. They did pretty aggressively promote David Gardner’s latest IPO recommendation over the past month or so (that was Match, we covered it here), but most of their ads have been reruns of pitches that we’ve seen and written about many times (new golden age of TV, etc.)…

… so when I saw this new Fool spiel come across my desk here at Gumshoe HQ, I figured we’d see a lot of questions about it.

And, of course, I wasn’t disappointed. The latest Stock Advisor ad hits right in the center of what has been the hot story in tech investing for the past six months or so, and the story most ardently pushed by the various investment newsletters:

[drum roll, please…]

Virtual Reality

It’s still far too early to know whether virtual reality (immersive artificial worlds, like with the Oculus Rift headset) or augmented reality (providing something on top of the visible world, like with Google Glass or Microsoft Hololens) will end up being a revolution that really creates wealth in rapid fashion, or whether it will be, like 3D printing, a story that gets ahead of the economics…

… but I suspect that most of the virtual reality stocks we hear about will end up being far stronger than most of the 3D printing stocks, if only because most “Virtual Reality” stocks we see teased and hinted at and talked up by pundits are really pretty diversified technology companies who won’t rely on a massive breakthrough of virtual reality technology in order to stay solvent.

But let’s get into the nitty gritty of the Fool ad, shall we, and see if we can identify those “four stocks” that their experts believe are “poised to dominate the virtual reality market?”

If you like them and their rationale, go ahead and sign up for a Motley Fool subscription if you feel like it… but you’ll usually find yourself in a more rational frame of mind for investing decisions if you get the first introduction to a company from someone who isn’t selling you the information with a “dominate the market” spiel. Let me ID the names first and get you started on a little research, so you can tame your lust before you pull out the credit card or call your broker.

Here’s what the Fool starts us out with, to go along with their video discussion:

“From the investing system that The Wall Street Journal reported as one of the best performing in the world…

  • Discover the 4 stocks we believe will explode when virtual reality takes off
  • Proof from an obscure Wall Street insider report that predicts a $182 billion windfall for VR investors.
  • In-depth research laying out the case for a tidal wave of VR adoption by US consumers in the near future”

Eric Bleeker is the analyst who runs the video presentation in this ad, and he starts us out with his two base assumptions:

  1. “VR is going to be big. It has the potential to change the world in the same way that smartphones, the Internet, and computers have over the past several decades… and…
  2. “Because of that potential, investors who make the right moves today will make an absolute killing.”

So you may question those assumptions, but that’s where he comes from. The first bit of the story is all about avoiding the luddite trap of doubting new technology, with quotes from lots of sources about how the “flying machine” would never work, the automobile was a dangerous novelty, individuals would never need a computer and certainly wouldn’t have one in their homes, television will never be able to compete with radio… etc. etc.

That, of course, puts you in a different trap of assuming all new technologies will be adopted to huge acclaim and become major parts of the economy like airplanes, automobiles, television and computers. That’s obviously not true, and we don’t often think about all of the failures — industries that never materialized despite some exciting new technology, or companies within those successful industries who didn’t achieve or sustain success. The survivorship bias makes us forget about the failures and think only about the glories reaped by the survivors. Which is probably a good thing in that it keeps humanity moving forward and innovating, but it isn’t necessarily a good thing when building your assumptions about an investment.

Here’s a bit of that from Bleeker:

“I’m guessing that you missed your chance to be an early investor in Microsoft back in the 1980s.

“Or Amazon in the 1990s.

“Or even Google in the early 2000s.

“But none of that matters right now.

“I don’t care if you’re 25, 55, or 85… if you’re rich or poor… working or retired… man or woman… college grad or high school dropout.

“One of the great things about the stock market is that your past does not matter.

“Even if you’ve invested in 100 duds in a row, you start every new investment with a clean slate.

“It takes just one big winner to completely change your life. And as you’ll soon see, I think this could be the kind of once-in-a-decade opportunity you need to do exactly that.”

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