Should you believe what you read or buy?
Here’s an example. A “good” stock (on so-called “fair market value” concepts) was recently trading in the twenties. It’s now in the forties. An “equity research report” says buy it until it hits $1.45, then sell.
The scenario is perhaps too good to be true.
Buy, sell, or hold?
That’s a multiple-choice question with not necessarily a single answer. Take your pick. The generally smart choice is to sell and buy, but do you have the guts?
The not-so- strange thing is that in this case, the natural ponzi could even work. The company is tiny. If enough investors get “excited,” it is quite likely to see even $2 pricing. Of course, it’s probably irrational, and those who buy at that price are the latecomers. See my post on efficiency and irrationality in the stock markets.
We will revisit in six months’ time.