Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Tweeter - Why You Should Triple-Check the Ticker Before Buying That Stock

InvestorEducation / Learning to Invest Oct 23, 2013 - 06:43 PM GMT

By: Casey_Research

InvestorEducation

By Dan Steinhart, Managing Editor, The Casey Report

A simple misplaced letter can make a world of difference.

Two weeks ago, on an otherwise quiet Friday, voracious investors piled into the most anticipated tech IPO since Facebook. Buyers bought over 14 million shares of social media giant Twitter, sending its price soaring over 1,000%.


Or so they thought. Twitter's shares aren't public. The company doesn't IPO until November.

Instead of buying shares in Twitter, these twits were unknowingly throwing money at penny-stock Tweeter, which trades under the symbol TWTRQ. Similar to Twitter's proposed ticker of TWTR, but not the same. That "Q" changes everything.

Tweeter, if you're wondering, is a bankrupt Boston-based electronics retail chain. There's a decent chance your house is worth more than the entire company, about $600,000.

Twitter, of course, is a social media powerhouse sporting 218 million users and a valuation of $15 billion. How investors could confuse the two is a mystery. To me, the only possible explanation is that a human brain was not part of the equation. I don't know about you, but I never buy a stock without triple-checking that I have the right one. This incident has "algorithm" written all over it.

It seems the culprit was a computer program designed to speed-read the news and then trade based on its findings. The day before the incident, Twitter filed its IPO paperwork, a prerequisite to executing its IPO. An algorithm must have read a news article, observed "Twitter" and "IPO" in the same sentence, and gone on a misdirected shopping spree.

This one episode is enough for a chuckle, but it happened again a few days later. This time, TW Telecom, which trades under the ticker TWTC, soared from $30 to $300 in a matter of seconds, apparently for the same reason. Nasdaq canceled the trades, saying the transactions were "clearly erroneous."

Social Media Frenzy

Investors sure are antsy to start trading Twitter stock. No wonder: social media is red hot. I just got a marketing email this morning touting the track record of "the only Social Media ETF," ticker: SOCL. Apparently, it has outperformed the S&P 500 threefold in 2013. That's quite an accomplishment given that the S&P 500 has risen a handsome 20% itself in 2013.

And take a look at a few of the individual social media companies. Facebook, having fully recovered from its disastrous IPO in the spring of 2012, has doubled in the past three months and is trading at its all-time high. LinkedIn is just a hair below its all-time high. Groupon, the comparative laggard, is "only" near its 16-month high.

What's the driver here? It sure as heck isn't fundamentals. Facebook sports a P/E ratio of 211x, and LinkedIn 646x. Groupon's is infinity, because it's losing money. Yet it's worth about $8 billion. Those nosebleed valuations would make the dot-com era darlings jealous.

Now, all three of these companies are in the earlier stages of learning how to monetize their massive user bases. I'm sure their potential is breathtaking if they can execute. But that's a big if. Remember what happened the last time investors ascribed triple-digit P/E ratios based on potential alone? Every company with "e" in front of its name (eToys) or ".com" behind (pets.com) soared, only to leave investors broke when the dot-com bubble popped.

Even the survivors of that era that eventually transformed into tech powerhouses struggled. Amazon, an amazing company that seems to offer the best price on every legal product known to man, lost 93% of its value during the dot-com bubble. It eventually recovered to surpass its old all-time highs, but it took a decade to get there. Recently, it's been delighting shareholders with strong performance (including BIG TECH subscribers, who cashed out of Amazon with a cool 49% gain earlier this year). But the road to success was neither easy nor short.

Amazon's success tells us that meeting sky-high expectations is possible. I don't doubt that one or two of the very best social media companies will realize their eye-popping potential. Eventually. But it's a long journey to that point, full of unpredictable obstacles. Just like Amazon's stock chart, the path to success won't be a straight line.

That being the case, if you want to jump on the social media bandwagon, do your bank account a favor and bide your time until sober reality sets in. Wait until the bandwagon has broken down on the side of the road, with two flat tires and dejected passengers lamenting, "Darn it, it happened again. I was sure this time was different." You'll know it's that time when P/E ratios are in the low teens.

That's when you want to invest in these companies. Not when they're riding high on dreams of the future. And if you want help in that endeavor, consider a subscription to BIG TECH.

Our Tech analyst team pride themselves on separating hype from results, and only invest in companies that are poised to deliver big returns to subscribers now, not in five years. Their track record is nothing short of astonishing, with a 49% average gain per closed position and an average holding time of 301 days. In other words, they don't just beat the market, they crush it.

Read more about BIG TECH, or click here to start your risk-free trial with 3-month money-back guarantee.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in