Caveat lector/emptor

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?

Or ignore?

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.

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