The stock market has been in a very strange state of late. With a vast and quick crash in March, markets climbed back so fast that it left us equally as unnerved as the crash itself. It’s hard to make sense of the stock market right now, with companies gaining strength despite an influx of terrible news.
It’s likely because speculation is at its peak, and the market is driven by algorithms that have no common sense. The market isn’t the economy, no matter how much mainstream media paints them as synonymous with each other. They’re distant cousins, at best. Even the positions being traded by investors and human behavior is irreconcilable with what’s going on in the streets. Investors are always looking ahead, which is why we’re left with a feeling that the current prices aren’t a reflection of what’s actually going on.
Ten Stocks That Are Gaining For No Good Reason:
AMC Entertainment reported its first-quarter earnings during the second week of June, and it left a lot to be desired. Its theatres have been closed since March 17th, revenue fell by 22%, and a $1.85 billion non-cash impairment charge has been discovered. The price did take a hit as a result, but it had been rampantly gaining since Easter.
Nikola rose to a record high of 79.73 USD on the 9th of June from 10 USD a couple of months ago. This hugely inflation in its value comes about despite making no sales and having no evidence of being a $100bn company. This is perhaps the biggest mystery on the list, and Nikola Insiders are filing to sell 53.4 million shares.
Hertz has been on a downward trend over lockdown, but it actually absurdly surged after declaring bankruptcy. Despite creditors having to be paid before shareholders claim any of the leftover assets, we actually saw the price climb in June.
Despite closing over 400 stores and having to surrender to lockdown measures across the world, Starbucks has been on a relentless price climb since the market crash. It’s understandable to see Starbucks as a good buy, as it’ll regain sales quickly after lockdown, but actually there’s almost no speculative value left in buying the stock (in the short term). Or in other words, its future value is already today’s value.
Manchester United are undoubtedly a strong global brand, but it seems odd to see the price climb from under 13 USD to over 17 USD during a period in which they didn’t play a single game or sold a single ticket. To make things worse, if the league was to go null (a possibility), many income sources would be taken away.
Tilray is a seemingly unstoppable stock. It rose by 109% in a three months period, and it’s been continuing a consistent growth over lockdown. The company however has failed to meet up to its 2018 IPO expectation, and the company’s strategy has been accused of being non-existent. Its Manitoba Harvest acquisition hasn’t worked out well, and just the other day it entered a lawsuit because the execs had misled investors over the ABG deal.
UK formalwear outlet Moss Bros has been struggling throughout 2020, even prior to lockdown. Sales down, and the highstreet is closed. Yet, Moss Bros are trading at over 20p, and continues to climb.
SmileDirectClub was a huge IPO in 2019, and it has been performing very well in 2020. This comes after having its stores raided in 2018 by the Dental Board of California, and has since been down around 50% from its IPO price.
Bandwidth Inc has been climbing ferociously – even the March crash hardly hurt the stock. It seems though that this is a bit of hype, and that the company actually has yet to prove this value. It’s in a highly competitive space, and was deemed a poor stock by Forbes’s AI system. Surely this stock has hit its limit?
Capital One Financial Corp
Capital One is a credit card company that has been volatile over 2020, but it’s still slowly regaining over each month that passes. This is surprising though, considering its client base consists of small businesses and commercial customers. Surely these clients will be struggling to make repayments over the next few months in this climate?
It seems that ultimately, most of these gains are only temporary. They shoot up quickly, but without good evidence, and they usually don’t last. Of course, some still have a strong future, like Starbucks, but many others like Hertz clearly do not.
The pandemic has caused volatility and uncertainty in the market, and although it doesn’t pose the same kind of 2008 existential threat to the economy, it has some unique threats to many different industries.
It seems logical to conclude that many of the above stocks will be popular as shorts for some investors. Whether they’re fundamentally overpriced or simply experiencing some brief market hype, it’s clear that reality is not being reflected in stock prices right now.
With a newsfeed that’s dominated by race tensions and a global pandemic, it comes as no surprise that individual stocks are seeing some price movements that may not add up on paper. It’s almost disturbing to think that prices are higher than they were at Christmas time – a time where shops were open, seasonal sales were booming and COVID-19 didn’t exist.
These gains since the March crash are not stable, but then, the long-term view of investors may end up faking it ‘til they make it, regardless.
My name is Winterberg and I started this investment blog to share my journey towards financial independence.
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