[Financial Planning for the 100-Year Life] Growth Stocks of Imagination and Growth Stocks in Reality

Interest Grows Over Whether ChatGPT-Related Stocks Will Fade Like the Metaverse Craze
Secondary Battery Stocks May Recreate the Glory of Semiconductor Shares

Jongwoo Lee, Economic Columnist

There are two types of growth stocks. One is the growth stocks of imagination. These are growth industries that we cannot predict if or when the envisioned world will actually come, but we can imagine them in our minds. The other is actual growth stocks. These are growth industries recognized by the market as likely to bring about a similar world in about 10 years, even if not as much as currently expected.

If ChatGPT represents the former, then the latter is the secondary battery industry. At the beginning of the year, as ChatGPT stocks rose, there was talk that the world would be revolutionized by ChatGPT. Whether it will turn out as imagined or fade away like the metaverse craze two years ago remains to be seen. The situation with secondary batteries is different. While their adoption rate may be lower than expected now, no one doubts that the era of electric vehicles will come. This will be a factor influencing the stock market for a long time.

Recently, secondary battery material stocks surged. For example, the stock price of Ecopro BM, the largest by market capitalization on the KOSDAQ, doubled since the beginning of the year. Because of this, opinions on secondary battery-related stocks have sharply divided into a small group who are very optimistic and a large group who strongly dislike them. How will this situation resolve?

It is useful to refer to the situation after semiconductor stocks first rose in mid-1993. At that time, Samsung Electronics’ stock price was about 500 won, and its market capitalization hovered around eighth place. Although it might seem that most investors were enthusiastic since a widely liked stock was rising for the first time, that was not the case. Like the current secondary battery stocks, the majority viewed semiconductors as a speculative bubble, while only a few were enthusiastic.

When the stock price rose from 500 won to over 1,200 won in 1994, both individual and institutional investors were busy selling Samsung Electronics shares. They believed that since the stock price had formed a bubble and reached an unprecedented level, it was necessary to dispose of shares quickly. Short selling others’ stocks also became popular.

Over time, with the launch of Windows, semiconductors experienced a tremendous boom, and it became known that Samsung Electronics was the first Korean company to achieve a trillion won in net profit. However, the market was unaware of this until then. People only acknowledged Samsung Electronics’ rise from 1999, when the first rise ended and the second began. And until the stock reached 90,000 won shortly after the COVID-19 pandemic, no one doubted the capabilities of semiconductors and Samsung Electronics.

Whether the current secondary battery industry is in a situation similar to semiconductors in 1993 depends on one’s perspective. However, trading behavior should differ. If a growth stock maintains an upward trend, it is advisable to buy a little even if you are not fond of the stock. Those who have bought before respond differently later. Avoiding buying altogether may cause you to miss the entire opportunity that the growth stock offers.

Samsung Electronics rose nearly 200 times from 500 won in 1993 to 96,800 won in 2021, but most people never traded the stock. Because they had no trading experience, Samsung Electronics was always an expensive stock to them. I hope people do not make a similar mistake with the secondary battery industry, which is expanding its market dominance.

Lee Jong-woo, Economic Columnist