Thursday, September 15, 2011

Fundamentals vs. Fear in Today's Stock Market

I just read in the Wall Street Journal that ~50% of the IPOs that listed this year are trading below their offering price. Wow! Didn't I blog about the great opportunities to go public over the next 12 months. Good thing I'm typing, not talking because it'd be hard to talk with my mouth full of all that crow!


Actually, I still stand by my belief. The fundamentals of the market are the same. However, fear runs rampant and that's what causing all the volatility in the market right now. Fear. The market performs based on underlying fundamentals over time...but in the short term it reflects the short-term fear (or exuberance) and negative (or positive) expectations of investors. This is why there are traders. People and companies trade on this volatility. Some traders, especially options traders, are making a lot of money right now.

So how long will this fear last? Not sure. I wrote yesterday about buying into all the negative press and the adverse impact it can have on your business. As you can see, it works the same with the markets. I'm best at analyzing trends and mid-term to long-term behavior. Short term...sorry.

The good news is that the entities going public have adopted a wait and see approach. They haven't scrapped their plans. They're waiting for the volatility to level off so they can get the highest subscription rate on the IPO at the highest offering price. Many of the companies that have gone public are good businesses with strong fundamentals. (Like Sesame Street, boys and girls, "fundamentals" is my theme for the day!) So investors are still interested. And investors are interested in the ones waiting in the wings.

Hah! I was just joking about eating crow. The venture capital market for later stage companies is still going strong. Capitalize while you can. And I'll keep my eyes on the market.

An aside: I missed out on all of the IPOs. I'm on no one's special list it seems. But I'm poised to take advantage of the price drop. Like any good long term investor, I focus on the fundamentals (that word again) and buy low, sell high.

No comments:

About Me

Popular Posts

Designed By Seo Blogger Templates