Avoid investing in overhyped stocks is what the year 2018 taught us. Yogesh Supekar and Karan Bhojwani discuss what exactly are overhyped stocks, how to identify them and how they have fared in terms of their fundamentals
Any investor who has spent a decent amount of time in equity markets would have noticed that stock prices move up when profit increases, balance sheet gets stronger, margins improve, debt gets reduced and sales grow at a faster clip. It is only logical to expect the prices to go up when such fundamental triggers are available for any stocks.
Also, it is quite possible that you may have seen stock prices soar even when the earnings are flat, balance sheet stands unrepaired (higher debts), promoter shares are pledged incrementally, margins are struggling to improve and sales de-grow or slow down.
The stock prices take cues from improving or deteriorating fundamentals, alright, but at times the share prices are determined purely on the basis of the popularity of the scrip. The more popular a stock is amongst the investors, the more the demand for the shares! Thus, in practice, the market tends to value stocks based on their popularity and not merely on their fundamentals.
The reality is, in the equity markets, both the scenarios exist and, as a smart investor, you just have to avoid being caught in the hype of the popular stocks that are not supported by fundamentals. The more intense the popularity contest gets for the stocks, more and more investors are found investing in these so-called popular stocks or “overhyped stocks”.
The year 2017, which was a great year for investing, saw investors flocking to invest in overhyped stocks, only to realise that these set of popular stocks were not supported by fundamentals to back the high valuations commanded by them.
What are overhyped stocks and how did they perform recently?
Overhyped stocks or popular stocks are the ones which are popular among investors, primarily retail investors. Some of the characteristics of overhyped stocks are :
1. Overhyped stocks show huge price pop ups with flat earnings per share.
この記事は Dalal Street Investment Journal の January 21, 2019 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Dalal Street Investment Journal の January 21, 2019 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
How To Invest In An Ageing Bull Market
Bull rallies (periods when stock prices rise) and bear declines (periods when stock prices fall) are natural parts of stock market cycles, but they don't follow a fixed timeline.
Should You Entrust All Your Money To A Single AMC?
If you are a market participant, you have probably heard the quote 'don't put all your eggs in one basket', which suggests diversification. Investors often focus on diversifying across categories like large-cap, mid-cap and small-cap, but they may unintentionally overlook diversification across different AMCs. The question arises: is AMC-wise diversification really necessary? Rakesh Deshmukh takes a closer look at this scenario
Wild Swings Engulf Global Equities
U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.
U.S. Elections and China's Economy Hamper Commodities
Commodity markets experienced selling pressure in the last fortnight, driven by uncertainties surrounding the upcoming U.S. presidential elections, concerns about the Chinese economy, and increased agricultural production in Brazil.
Wealth Building For Retirement Through Mutual Funds
Retirement is one of the most crucial and lifechanging phases. It marks a period where maintaining your lifestyle becomes paramount even though your regular income stops.
Mastering Investment with Information Ratio
Information Ratio helps in navigating the complexities of the investment landscape by assessing an active fund manager's performance. And though it has its limitations, it remains an essential part of the finance industry. The article explains what Information Ratio is and how investors can use it as another tool
Plan To Be Financially Independent
Each of us aspires to be financially independent as it ensures having enough resources to be self-sufficient and control our finances.
❝Technology is the new game-changer"
With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company
What If Donald Trumps?
The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store
Sectoral Gains Make A Mark
Benchmark indices continued their uptrend, reaching new record highs, although the pace has slowed as the broader markets faced selling pressures
