AMC wins Keynesian beauty pageant
John Maynard Keynes, a savvy investor as well as a famous British economist, wrote in 1936 that the stock market looks like a beauty pageant, with a twist.
The goal, he said, is not to select the candidates who are “really the prettiest”, but rather those whom other judges find the most beautiful.
Keep this in mind as you look at the top five winners from 2021 to October 29, among stocks with a market value of $ 2 billion or more.
I hate almost all of them.
These are stocks of stories, stocks of memes, hotly discussed on the Internet. Several were stimulated by fans on Reddit.com’s Wall Street Bets forum.
The inhabitants of the Wall Street Bets forum like to accumulate stocks that are sold heavily short – that is, stocks that many investors, especially hedge funds, bet against. If they can drive the price up, they can force the shorts to unwind their trades, which further drives up the stock price.
AMC Entertainment is the world’s largest movie theater chain, with some 950 theaters and over 10,000 screens, primarily in the United States and Europe. Clearly, the pandemic has caused theaters to close or operate with empty seats.
My main objection to AMC, however, dates back to before the pandemic. Her best year ever was 2013, eight years ago, when she was making $ 4.76 per share. It has never been close to that number since. He suffered losses in 2011, 2012, 2017 and 2019, none of which can be attributed to the pandemic.
Theralink Technologies, based in Golden, Colorado, describes itself as engaged in “the development and commercialization of novel cancer immunotherapy products.” Obviously, the addressable market there is huge. But the highest revenue the company had in a year was $ 780,000 in 2012.
The company only reported profit once, in 2018. That profit was $ 9.09 per share. The year before, he had lost $ 90.02 per share. Over the past 52 weeks, the stock has climbed as high as $ 10 per share and dropped to a nickel. As of Friday, October 29, it stood at $ 2.50, up 38% for the day.
GameStop was the first big hit for the Wall Street Bets crowd in tightening the shorts. It is a legitimate business, but one that faces significant challenges.
Sit? Here is the range of 52 weeks: maximum of $ 483, minimum of $ 10.50. The price at the time of this writing is $ 183.51.
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Ocugen, of Malvern, Pa., is a clinical-stage biotechnology company working on “rare and underserved eye diseases.” It also has the right to market the Covid-19 Covaxin vaccine in the United States and Canada, if and when the drug is approved in either country. The drug was developed by Bharat Biotech from India.
I’ve seen rhapsodic comments on Reddit that the World Health Organization (WHO) is about to endorse Covaxin. But in late October, a WHO official said there were “a number of inaccuracies” in the drug’s application.
SM Energy is, I think, another story. It’s not really a store of memes. Rather, it is a speculative way of playing the big rebound in energy prices, in particular natural gas. In commodity industries, it is sometimes the marginal players who benefit most when commodity prices rise.
SM qualifies, in my book, as a margin player, since her market cap is $ 4.2 billion (small for an oil and gas company) and she has had losses in six of the last nine. years.
Take my skepticism about these actions with a grain of salt, however. I have often pooped on the hottest stocks of the year before, and I have often been wrong.
Last year I was right. The five big winners that I despised only returned 4.8%, far behind the Standard & Poor’s 500 index, which rose 41.2%. The biggest winner until October 2020, Focus on video communications
But in the long run, the big one-year winners have often done very well. Over eight years, the winners I’ve criticized averaged 36.5% over the next year, beating the S&P 500 at 18.3%.
Disclosure: A hedge fund that I manage has a short position in AMC Entertainment.