Hoop - Who is Mr. Market? It's exactly that same aggregate group of investors who were
long in this stock (back at that point in time)
Yep and any point in time actually and the benefit of hindsight definitively proves to us that those investors who stayed long got punished
only the buy and holders who entered at the top. To be more concise to the point.. they mis-valued the stock.
As the fundamental variables going forward changed they failed to exit...
.Mis-valued Hmmmm perhaps...Entering back then could've been correct had PEB performed to the Fundies expectations....Mind you investor exuberance played a big role, as I mentioned some time ago I thought pricing PEB going forward 2 years seemed rather ambitious and risky in a world of accelerating tech change..
What's normal pricing going forward in a Stock Market .. Average of 6 Months is it??
That aggregate group (on a given day) will be comprised of an eclectic mix of "investors", from pure fundamental investors (of the Benjamin Graham variety), to momentum traders, to technical traders all the way down to casual retail investors and to pure speculators.
Yep every type of investor
Now whilst I can't speak for the others, from the significant advantage point of having hindsight, any fundamental investor who stayed long in this stock at those (significantly overinflated..
we only know this now not then) levels clearly got it wrong
they wouldv'e got it right is the future did as it was suppose to do however this alone doesn't disprove the merits of fundamental investing,
agree in fact it strengthens the argument of it..
really? can't see why it needs strengthening as it is a mainstream market valuation discipline
All investors (and this likely includes traders, technicians and speculators) will fall on the spectrum of talent. Some have it, some clearly don't and the vast majority are peppered in-between. The fact that such a spectrum exists again goes back to my earlier point/quote (highlighted above) about the existence of opportunities.
The world is full of opportunities
When the Mr. Market (essentially an aggregate group of investors) mis-prices a stock relative to its fundamentals
very rare nowadays as telling porkies within a balance sheet is now a criminal offense..gone are the days of creative accounting in valuing non market assets (i.e. gets it wrong), then this creates opportunities for those who will get it right (generally those with more talent).
Hmmm Usually being fundamentally right is wrong..FA forgets that Mr Market is the boss...The market could stay wrong for years...usually the market is rarely fundamentally correct as its either overbought or oversold and is only correct in the fleeting moment when going from one to the other.. This concept is nothing new, its generally referred to as generating "Alpha" or "the alpha co-efficient", which can defined as excess returns, or more succinctly as "talent".
Yes but it is generalised over the market of everything..Generating alpha with one stock only is more aligned with using TA discipline
You mention above that the fundamentals have changed and the market has corrected. I don't believe this to be the case. The fundamentals of a given company at a given point in time (whether an investor knows it or not) are essentially the facts of the company
No not always..Company announcements to the Market get the number crunchers attention instantly and they crank their wheel and out spits the new valuation and any change in the risk...their action is noticed via TA signals and its the quick and the dead after that..they. The Market/Investor is not privy to a full view of the facts (i.e. every single facet of the company),
true so in reality they are reliant on their "perception" of these facts, as interpreted by a set of numbers which are generated under a array of accounting assumptions. In addition to their perception of these facts/fundamentals of a company in its present time, a given investor will also have a view as to what these fundamentals may look like in the future, i.e. they are projecting.
If one knew the fundamentals of PEB omnisciently, it may be that these facts haven't really changed a lot in the past few months/year.
Yes, but investors fundamental perception (as a group) on PEB's future has changed Things may have been steadily on track for its commercialization process, the company may have achieved several notable milestones, the awareness of which suddenly sending the stock price into the stratosphere...
Yes that could happen and if it did happen say 9 months ago those FA investors and Mr Market would had been right not wrong..eh? With lofty prices comes lofty expectations and suddenly investors are hungry for news, good news, great news, or any news really, as long as it is evidencing progress.
This is called investor greed, PEB has been there :) Meanwhile the company is continuing on its path and is expecting to meet its modest sales target. The ravenous investors on the other hand are expecting big things and when the sales aren't big (or big enough to justify the price) suddenly the company is doomed, the sky is falling and its time to dump their shares and run to the hills.
This is called investor fear, PEB has been there too and recently:(
Now a shrewd fundamental investor may have seen this all coming, quietly realizing the stock-price is continuing to edge up to unfathomable levels despite nothing materially different having occurred with the underlying company. Sure some agreements have been signed and the stock has "de-risked" (whatever that means) in terms of its commercialization process. The sales funnel he notes has yet to have formed and the cash-flow is far from sight. Progress for both is a long way away and as such he is unable to see how the company is suddenly worth an extra $200 million in terms of its market capitalization.
He sells
Maybe..but the shewd FA could hang in there...Knowing the increasing risk that investor will not have fallen in love with that stock and the twitchy finger will be hovering over the big red sell button...any hint of trouble and the shrewd investor does a Snagglepuss exit.:cool:. The stock price continues to climb. Maybe he was wrong, but then again he profited sufficiently (without taking on additional risk). Others tell him that he is wrong and this company is going places
Could also be some very large ramp up investors planning to exit but need time to unload (or at least the stock is..) and they remind themselves that they are right (in fact many times over). One day the stock starts to turn and the dream starts to come crashing down. The knives are out and
the dipsters are out there trying to catch them :) people start down-ramping the stock.
Animal instinct to evolutionary improve their species, kill off the weak and the sick..
The moral of this story is three-fold:
1) There are a range of investors out there who lie along the spectrum of talent. These investors collectively
are Mr. Market
.and Mr Market's collective knowledge and IQ is superior to all individual intelligences...unless someone cheats (insider trading)..Mr Market is a living entity but being a collective of the animal species called Homosapiens, Mr Market is vunerable to the same herd intinct, behaviour and emotions as them (us)..
2) The fact that this very spectrum exists allows for some investors to outperform others (at their expense).
The way of the world.. Nature can be cruel This becomes significantly more evident in the long-run. The existence of this spectrum and the undeniable fact that its participants are human leads to an abundance of opportunities
(and traps..us animals can be a cunning species) in the market for any investor to exploit.
3) Fundamental investing isn't a science nor even an art. It's a sport, or more specifically a blood-sport and some are more talented at it than others. In the long run they will win more than they lose, and investing by its nature is a winner take all sport.
Fighting words Mate...If you hear a buzzing noise in the sky it could this guy after your blood http://i458.photobucket.com/albums/q...p_1/snoopy.png