This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Investing Beyond the Hype Cycle


NEW YORK ( TheStreet) -- Almost two decades ago, the Gartner Group created a graphic called the "hype cycle" to explain its own behavior, and that of other analysts.

The graph looks like a hill followed by a slope. The hill shows a new technology's potential being hyped well beyond its capability, then falling precipitously and gradually picking up momentum toward its true potential.

Internet investors saw a long hype cycle, lasting right until the Time Warner-AOL merger in January 2000. The fall was profound, but some companies from that era including (PCLN) and (AMZN), are bigger than they ever were. GOOG (GOOG) barely existed when the hype ended.

Social investing went through a hype cycle, but the cycle crashed before the investing public was invited to the party. That's why the Facebook (FB) IPO was such a disaster. The flood of stock was a "Time-AOL" event for the space. The bubble popped. But that doesn't mean there was no "there" there. There was. How much, we'll find out.

The 3-D printing market has just gone through its own hype cycle. The space looked like a big winner last year, but if you got into the leading stocks -- 3D Systems (DDD) or Stratasys (SSYS) -- three months ago you caught a top. Both are down about 20% from early January.

What the hype cycle really means for investors is that if you get in early, you have to be prepared for a hard fall. Those who get into the cycle, don't fall in love with the space, and get out quickly, like Mark Cuban did with in the 1990s, can come out billionaires. Those who don't, like David Weatherell of CMGI, now ModusLink (MLNK), can lose billions.

Since Gartner came up with its chart I've seen countless hype cycles. There was a broadband boom, there was hype around the Internet of Things, there was a health IT boom and one around open source. In each case there was something real, but nothing like what the hype promised. In some cases the hope has yet to be realized.

All of which brings me to "the cloud."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs