Desperate Housewives star Felicity Huffman is facing 5 years in prison for being caught in a bribery scam in which celebrities, CEOs , lawyers and high net worth individuals paid huge sums of money to get their kids into prestigious US universities, while Cardinal Pell was sentenced to 6 years jail for child molestation and engaging in lewd acts with under-aged kids. Not saying that bribery is not a serious offence, but clearly the penalties between the two offences are imbalance and disconnect.
So is the stock market. It can be for a long periods of time when the market fails to recognise a share price of a stock that is more worthy than what its been trading at (case in point is YOW which while is not a great stock but was trading at prices way below its intrinsic value) while there have been cases where it has been somewhat myopic to support a share price of a stock with lofty valuation relative to its commercial success to date. Much of this had to do with strength of the shareholder base (as I previously posted) just like Pell would probably have received a stiffer sentence had he not been a prominent leader of the Catholic Church. But we have seen a strong shareholder base previously with BIG, GSW and a number of other notable tech darling stocks.
Stocks which had an almost irrational religious cult-like following would have sucked in many unsuspecting newbies to the market seduced by the expressed upramping exuberance on HC - the likes of BIG, GSW, BUD, and many others - eventually come down on weight of failed and unfulfilled expectations and hype on lofty expectations/promises. Shareholders in such companies are passionate and take it on themselves to double down to support a declining share price hoping they could end the stock's price miserable downward trajectory by sucking in new buyers beguiled by the prospect of a share price recovery.
When you read HC, obviously you need to DYOR (do your own research) - some stocks are not for everyone and you need to fully understand that HC forums are riddled with vested interests (no less including mine although when I caution all regarding the coming of the Big Kahuna or the falling knives stocks, I have nothing to gain from it).
But based on my experience so far, on risk reward basis, it is far more promising buying a stock with an upward price trajectory than one that has a downward price trajectory. Occasionally, the latter stocks may well have a price spike just as 9SP did but in most cases, it would not eventuate to be a sustainable act of Lazarus. Stocks that have a downward price trajectory in the smallcap world can lose up to 90% of their original value at their heights and often people buy into such stocks after a 50% fall thinking it is cheap, except cheap gets cheaper. Remember this when a stock has lost 50% of its value, it takes 100% gain to regain its original value.
