Today I spotted many forecasts on the future price of gold, ranging widely. Recent gold bear Tom McClellan had the best note, warning that because of a full moon there may be a shift in the market direction, meaning a price rise. And I thought it was silver that alchemists linked to the full moon.
There is no shortage of other nonsense in the stock markets. Two of our stocks suffered big losses last week. Each was an exceptional performer in an industry where there were many problems and other stocks did not do as well. Each was dumped down hard by shareholders selling out. Their weak hands were based on non-mainstream interpretations of the news. The negative stories came via Twitters and Facebook and blogs. They were not from mainstream websites, newspapers, or experienced financial analysts covering the companies.
You could call it the Shirley Sherrod effect. Poorly informed journalists (and others) fed half-truths and snippets deforming reality will not always check things out. And investors will sell first and investigate later when the rumors build up.
A third stock I happen to own personally also fell, because the CEO announced that on turning 65, later this year, he will step down. What did the sellers expect him to do, start going to kindergarten? That stock is Sandisk which was an Israeli share when I bought it, M-Systems Flashdisk, but then became American. It has recovered from the scare over Eli Hariri’s retirement.
Things for us all to learn from these episodic sell-offs. The most important is that stocks do not go straight up, however well-priced, however fast-growing. For the record, all three shares are global companies with an Israel identification. This is not a sign of some kind of concerted attack on Tel Aviv listed or related shares. It results more from poor investor relations decisions. The first crashed stock held its quarterly earnings webcast after hours in Silicon Valley rather than at home in Israel, so the usual suspects were not in the audience. The firm warned after gangbuster earnings growth that this growth rate cannot go on. Who thought it could? But the Israeli analysts were sound asleep at 3 p.m. Pacific Standard Time and could not shade the news.
The second Israeli stock in our portfolio suffered from a tenuous and ultimately unconvincing attempt to link an FDA approval to a rival firm for a generic it also applied to produce, not normally enough to crash the stock, to future generics of our shares’ blockbuster product. But without much science to go on, the gossips turned this news into a herald of a new age of biosimilars which would affect this company’s patents and sales. It’s not that simple.
I think the selloffs in these stocks are something like the Flash Crash in May. We will see further testing of the lowball prices hit last week by these shares, before they resume their normal upward trajectory. So the best thing to do right now is watch and wait.
However tempting the Blue Chip Israeli shares may seem off 10% and 35% from their earlier price level, I would not be buying more as they are picked up from the ground today.
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