They carried their pathetic signs with equally pathetic messages. Looking at them, one could feel some sympathy, but at least a few should have seen it coming.
Back then, in the 1930s, the signs read: “$100 will buy this car. Must have cash. Lost all on the stock market.” Now we see posts on Facebook: “They said to put money in here, so I’m in now. Wow, it won’t go up. Return my money!”
Human nature is relatively simple and incredibly powerful. All the books from the famous 1937 Think and Grow Rich to the latest self-help book on the shelf repeat the truth that attitude determines success or failure. And the one dominant trait of the successful person is confidence. That is the firm belief—that success is probable, if not inevitable.
Virtually every economic condition is determined by the public’s level of confidence. We talk about all the reasons a nation’s economy goes into hyperinflation. Yet, in all of the examples, it came down to the public’s confidence in the government, and that was manifested in their confidence in the future value of the currency. If you look at US consumer confidence measured from 1952, consumer confidence in the future peaked before economic growth did, and bottomed out before the economy started up again.
People lose faith in the future, and then external conditions reflect that lack of faith. The same is true for stock prices. Granted, there may be concrete reasons people begin to lose their confidence. However, we also have the ability to ignore any sort of “bad news” if we decide that it is not important enough to shake our confidence.
We can see this is the price movement of the shares of individual companies. While it is more fun to focus on the winners, we learn more from looking at the losers.
Three of the top 5 losing issues in 2018 are DoubleDragon Properties Corp. (DD), Primex Corp. (PRMX) and Xurpas Inc. (X). Each of these issues was a rising star at some time in the past two years. Yet, their dismal performance in the first two months of 2018 was a continuation of a declining trend. What caused the confidence to flee followed by the price decrease?
DD was the corporate wedding of the century and the offspring—or the stock—was supposed to be rich, beautiful and smart. While the financial numbers have been good, it seems as if their flagship CityMalls were not exciting enough to manifest in a higher stock price. Maybe more balloons at the grand openings might have helped.
PRMX is a conservative, family- owned and -operated company that is the best example of “good company; bad stock.” Holding virtually no debt and with steady earnings growth, what is there not to like? But, if the stock was a child of the company, people left the five-star debut early to see an old Kris Aquino movie because the debutante is so boring. So is the stock.
Sometimes, you can be a victim of your own description. X said that it is a “consumer-technology company” and “content provider.” That must mean the Filipino version of Facebook or maybe Google. Here again, X is a solid tech company that is positioning itself for the future, not to raise a lot of money to build a high-tech office.
Each of these companies probably deserves a higher stock price than it currently has. But investors’ expectations were not met one way or another, and that has caused a drop in confidence and, therefore, a fall in stock price. Perhaps they should have included “Blockchain” in their corporate name.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.