Will today’s roosters be tomorrow’s feather dusters?
I’m astounded by the stories of immediate success I’ve been hearing from those who have rarely, if ever, directly invested in the stock market. This success is often the result of mindless speculation in businesses whose share prices are out of step with future cash flows – and brings to mind Warren Buffet’s quip that “a pin lies in wait for every bubble.”
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
MICHAEL BARRETT
:
Interesting to speculate as to how much market activity is being driven along by the rise of app based stock trading platforms like Robinhood. I can’t remember the exact number but something like 600,000 Robinhood accounts had been started since COVID19 arrived in the US and I think Commsec has seen a huge rise in account set ups since COVID19 arrived here in Australia. I’m not saying everyone who has these accounts doesn’t know what they are doing, just that this is a dangerous time to be taking a punt on stock prices going the way you think they will go whilst you’re waiting for the impacts of COVID19 to flow through the market.
Roger Montgomery
:
Hi Michael, I think there is merit in the idea that an influx of inexperience has extended some of stock prices at the extremities.
jonathan meader
:
Brilliant as always Roger, especially now.
Your Voice calms uncertain frenzy.
Much appreciated Jono
Roger Montgomery
:
Thanks for the encouraging words Jono.
Chris
:
Roger,
It just struck me today that Afterpay (APT) is an 18.2 billion (yes, “b”) company and currently 19th on the ASX. But it makes no money, has negative cashflow, negative ROE, pays no dividend and keeps raising capital (issuing shares).
That market cap makes it bigger than ASX, REA, COH, RHC etc. but it doesn’t mean it’s “worth more” than them…am I missing something or is this the classic sign of a bubble ?
Roger Montgomery
:
Hi Chris,
I thought there were bubble elements to it when it was one tenth it’s current size. Some say Zip is the ethical player in the space. We have had difficulty accepting the amount of money that needs to be raised to fund the model’s growth.