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Watch out for fad stocks. Real owner, Snap & Zoom crashed

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CNN Business

Fads come and go in fashion. (Skinny jeans aren’t a thing anymore?) The same goes for the stock market.

Investors sometimes get too caught up in the latest major consumer or corporate trend, but only to see companies crushed when ambivalent tastes change – or worse, when a trend becomes mainstream and there’s a lot of competition.

For example, take a look at Boston Beer (SAM). Sam Adams brewer, who also owns hard seltzer brand Truly, is struggling as the popularity of alcoholic seltzer seems to be declining rapidly.

“The continued decline of the hard seltzer segment … is deeper than previously anticipated,” Jim Koch, founder and chairman of Boston Beer, said on the company’s earnings call in July.

Boston Beer will announce its final results after the closing bell on Thursday. Investors are waiting for a return. Stocks are down about 35% this year.

Snap (SNAP)’s social media platform Snap (SNAP)chat is another example of a product that has been incredibly popular for a while. But tweens and teens have since discovered TikTok and BeReal.

It didn’t help that the company’s augmented reality glasses, called Spectacles, were a massive hit that showed how hard it was for a social media company to diversify. The same can be said for Facebook and Instagram owner Meta, given the recent VR struggles.

“The competition with TikTok or any of the other very large, sophisticated players in this space has only intensified,” Snap CEO Derek Andersen said during the company’s second-quarter earnings call in July.

Snap, which also reported earnings after the closing bell on Thursday, is doing worse on Wall Street than Boston Beer. The stock fell more than 75% in 2022.

During the pandemic some new fashions have started – just to get back to Earth.

The stay-at-home darling, the Peloton (PTON), is now struggling vigorously as its popularity wanes. Sales have slowed, the company is still losing money, its founders have left and shares are down nearly 80% this year.

Video conferencing leader Zoom (ZM) has also been hit hard this year, down nearly 60%.

This is partly because more workers are returning to the office. There is also intense competition between larger tech firms such as Microsoft (MSFT), which owns Teams and Skype, WebEx parent company Cisco (CSCO), and Google-owned Alphabet (GOOGL), which owns Meet and Chat. Investors see Zoom as more of a one-trick pony compared to these tech giants.

E-signature software company DocuSign (DOCU) and virtual healthcare company Teladoc (TDOC) have also dropped this year after posting huge spikes from Covid in 2020. DocuSign (DOCU) is down about 70% and Teladoc (TDOC) about 75%.

And while life-saving Covid vaccines are certainly not in vogue, investor passion for the companies that produce them certainly does. Covid vaccine stocks are taking a hard hit this year, as investors are already pricing in the initial boom from sales of vaccines and boosters and are now wondering what’s next.

Shares of Moderna (MRNA) have fallen more than 50% this year after doubling 450% in 2020 and 2021..

Shares of BioNTech (BNTX), which has partnered with Pfizer on a vaccine, have also lost more than half of their value this year after rising in both 2020 and 2021.

Pfizer (PFE), a much more diversified company, is down “only” 27% this year. Novavax (NVAX), another biotech with a Covid vaccine, performed even worse. Its stocks have fallen by nearly 90% in 2022.

It just shows that investors like fashionistas are always looking for the next big thing. To quote the glory days of Heidi Klum’s “Project Runway” on Bravo, “one day you’re in and the next day you’re out!”