Last month at the Sundance Film Festival, I saw some great movies, partied it up a bit and schmoozed with celebrities. Perhaps it's the pseudo-celebrity status that came with my TV show or the $300,000+ personal loss I took on an investment I truly believed in, but I never get starstruck anymore. Not with celebrities and definitely not with companies. And as an investor, you can learn from this. I'll explain.While at the festival, I bumped into "celebrity" Maria Bello, and my ability to have a casual conversation with her led to an interesting encounter highlighted by some flirting and several great pictures (see them all HERE).
Ms. Bello barely gave starstruck, incredibly crazed, fans the time of day; after all, nobody -- celebrity or not -- can really take anybody who's screaming and crying in awe of their presence very seriously. So, while it was a fun moment for me, I couldn't help but think how this related to the stock market.
And, it hit me. Too many investors buy stocks because they are starstruck by the companies themselves. Superstar companies like Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), Merrill Lynch (NYSE: MER) and Goldman Sachs (NYSE: GS) simply have too many groupies. Don't be one of them. They can head south just easily as lesser quality companies, sometimes even faster!
Want some examples? Sure, my pleasure! Thanks to my cynicism, back at $200, many starstruck investors criticized me for this article in which I basically said Apple was not worth screaming and crying over. The Google groupies weren't too happy with this video, when I advised shorting the stock at $700.
Perhaps a better comparison would be to solar stocks like First Solar (NASDAQ: FSLR), Sunpower (NASDAQ: SPWR), JA Solar (NASDAQ: JASO) and Solarfun Power (NASDAQ: SOLF) as at the peak of their runups last year, investors truly were screaming and crying to buy shares at any price. Now those investor groupies are just crying.
What's my point here? Simple-when the volume of crying and screaming groupie investors reaches unbearable levels, that's the time to sell, and for aggressive investors, to short.
Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund
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Reader Comments (Page 1 of 1)
2-27-2008 @ 4:48PM
Marat Glazer said...
I agree Tim.. Don't fall for what everyone else is falling all over. It could fall just as quickly as it rose, and most times much quicker.
After Google's meteoric dump to the 450 level this week, alot of Bulls came out with some more bull about how the decline in paid click volume was related to Google's efforts in fixing an "accidental click" problem.
What strikes me as a little ironic and paradoxical is that, these same bulls only started talking AFTER the Google stock took the plunge. Where were they before?? Didn't they KNOW these numbers would be coming out soon? Why didn't they warn the market and possibly PREVENT the sell-off..
I don't buy it.. My guess is that these Google Bulls just recently bought in at around 460, or they're still holding a TON of Google shares at the 500-550 level, and they're just desperately trying to convince the market that Google is a good buy in these tough times we're in, so they can make a quick buck, or sell-out for less of a loss..
I really don't think GOOG will be seeing 500 any time soon. They better have some GREAT earnings come April. Something tells me there'll be more bad news in store for the Googster between now and then as Microsoft moves closer towards its acquisition of Yahoo, and Yahoo continues to fight for market share to stay independent.
Thanks for listening.
Marat
2-27-2008 @ 8:26PM
Terry said...
I, for one, am sick of the market gyrations. Good companies with great earnings being punished by analysts for questionable future earnings. Over priced stocks being touted as the next best thing. Quick, jump on board, and get some of these before they jump again in price.....only to see them tumble hundreds of points. If the analysts can't get it right, how is the individual investor supposed to even have a chance at succeeding in this market environment?
2-27-2008 @ 10:39PM
chet said...
ok fellas what do i do i own all my shares in apple and google and bidu for free . bought at low levels . goog at 160 appl at 50 bidu at 100 sold half of everything when it doubled . so do you suggest i should hold sell or keep since i now own them free?
2-28-2008 @ 2:01PM
Michael said...
Oh my; a hedge fund manager has caught up to the basic investment knowledge from 1850. Most stock investors have known of this phenomenon for +150 years. I can't wait to read that Mr. Sykes "discovers" the existence of bonds!
2-29-2008 @ 11:36PM
Elgee said...
I am a merrly lynch customer, I recently opened a account with Hongkong trader at Merryl Lynch by the name of Ravi Kher. This person fradulently without my consent, or authorization went ahead and bought a US$100,000 Structure which is owned by merryl lynch. After I complained to his supervisor Akshay Jitaly, they gave lame execuses by telling me that that their were no voice records kept, and they do not need to confirm their trades with me thru email. They asked me why did I not look at my month end statement. What I fail to understand is how such a large fortune 500 company can ignore such a simple compliance procedure. And after me telling them they can hide and expect their customers to keep quiet. There must be a better way to communicate with there compliance department. I do not know how to go about this. Hence I am pulling out my portfolio in disgust.