Wearable Technology Stocks Beware

For the last few years, technology blogs have been touting wearable technology as the next big thing. But despite the cult like following in the tech world, reality tells a far different story. Is wearable technology really the next big thing?

What You Will Learn

  • What is wearable technology
  • Wearable technology hype is the natural evolution of technology
  • What Google Glass taught traders
  • How to trade in the wearable technology space

What Is Wearable Technology

Wearable technology is a broad term. It is really too broad to be an investment category. It’s sort of like a catch all term. Everything from a wrist device that monitors heartbeat, to a shoe with a built-in pedometer can be called wearable technology. Some are even calling backpacks and clothing with ultra-thin solar panels, wearable technology. I even heard virtual reality or augmented reality headsets called wearable technology.

This fact alone is a big warning sign for investors and traders in this space. The best investments and products are the ones that are definable and niche oriented. They offer a solution to a specific, clearly definable problem. The fact that the term wearable technology is sort of a mindless catch all phrase for many different things suggests its probably too early for the average amateur trader to jump into this space.

Wearable Technology Hype Is The Natural Evolution Of Technology

Whether it was Google Glass, or now Microsoft Hololens, there is always hype about how this technology is going to change everything. Consumers don’t want change for the sake of change. The public wants a specific problem they are having to be solved.

In the early days of the Internet, there was insane hype surrounding websites. Websites were compared to brick and mortar stores. It was a virtual store in an alternate reality called cyberspace. What a bunch of hype that was. After sucking billions of dollars of investors money into websites, the public became aware of the technology hype and the whole thing came crashing down. People came to realize that it wasn’t a virtual store in cyberspace but a freaking website that any John living in his mother’s basement could set up.

New technology always brings in the hype masters who aim to suck the money out of ignorant investors before the truth catches on.

What Google Glass Taught Traders

Google is one of the biggest players on the block when it comes to technology innovation. If billions of dollars and years of effort by Google engineers can’t produce a consumer loved wearable tech product, what chance do amateur investors have? Google Glass became a disturbing intrusion into intra-personal communication. Seriously dudes. If someone in my family came to a birthday dinner with Google Glass on their head, I’d be pissed. I’d be like put the freaking technology away and visit with everyone for awhile. Smartphones at group gatherings are irritating enough. Google Glass didn’t stand a chance. Now a second wave of more discreet devices, like the new Apple Watch and similar wrist keyboards have hit the market. Other than getting that initial attention and showing off how clever you are, most of these devices will probably go the way of Google Glass.

An Apple Watch doesn’t meet any type of need that a smartphone doesn’t already provide. Plus, with a smartphone, you can put it in your pocket and poof, it vanishes. A guy at work bought a smartwatch and was showing it off. The joke going around the office is, “Oh no. We have a badass over here with his batman watch.” Whenever he is seen messing with his watch, people say lookout, here comes Inspector Gadget. I really don’t see the benefit of strapping a smartphone to your wrist.

That’s how you have to think as an investor. Be cruel. Assume something is stupid until proven otherwise. Just because something seems neat in wearable tech, it doesn’t mean that it actually is. When the novelty of the gadget wears off, the tech probably will get shelved too.

I’ll never forget a trader I know who got caught up in monitor tech. The price of monitors came way down and he started making really good money from his trades. He had a 3 monitor trading station setup. One day he told everyone how something big was coming regarding his trading station technology. He had an electrician come out and he wired up 8 large touch screen monitors and hung them on his wall. He said his trading was going to go to the next level now because he would be standing up while he traded instead of sitting all day long. I guess he thought he was Tom Cruise in Minority Report or something. Anyways his trading performance dropped over the next 3 weeks. A few months later when I saw him sitting in front of his trading station with 3 monitors, I asked what happened. He said he got tired of standing all day and then mumbled something about how stupid of an idea that was. That’s what new tech does to people. It fools them at first but when reality sets in, it’s discarded as junk.

Remember the FitBit? That was suppose to usher in a new level of fitness. Accuracy was horrible. Some wearable tech companies have a 30% return rate after buyers remorse sets in. Wearable tech has a high product abandonment after six months. It seems like some companies really don’t care if their wearable tech lives up to the marketing hype.

How To Trade In The Wearable Technology Space

I think something in wearable technology will take off and a product or company will emerge as a leader. When that happens, there will be plenty of time to jump in and ride the trend up like we did with GoPro stock last year. Until that happens, you are better off looking for investments elsewhere.

Below is an excerpt from the weekly show, broadcast every Saturday evening on YouTube, where I talk about wearable technology.