The investor should not be drawn into investing in the latest hottest shares, the “whisper” shares. These frequently turn out to be no more than hope and thin air These shares rise in value astonishingly quickly, but there is nothing astonishing about their subsequent spectacular drop in price.
There are constant whispers circulating about the latest craze, whether it be jungle remedies to cure all ills, high-tech start ups, or bio-technological miracles, lithium or blockchain, and it can be very tempting to join in.
On the face of it, these new companies are on the brink of solving the world’s major problems. Often, or more accurately usually, however there is no substance behind all these rumours and the stock-picker can leave his brain outside because he does not have to spend time checking earnings and so forth because usually there are no earnings.
Figuring whether the PER is acceptable is no problem because there is no PER ratio. But there will no shortage of microscopes and high hopes.
These fads are always with us – just look at market history. For example, in the 1980s Peter Lynch’s favourite story is a company called KMS Industries, which between 1980 and 1986 engaged upon various technological ‘miracles’, such as ‘amorphous silicon photovoltaics’, ‘video multiplexer’, ‘optical pins’, ‘material processing using chemically driven spherica.…To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
I'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk
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