There is no free lunch. This is the title of the book by economist Milton Friedman that business school professors expect you to read as part of your beekeeping school experience. This is a terribly boring book that you can skip just thinking about what it says on the can. The adage “there is no free lunch” was used long before Milton Friedman’s horrific book. This apparently happened when the bars served free lunches with a lot of salt, so that diners drank enough beer to more than make up for the free meal offered to them.
This old American proverb is especially applicable in today’s era of cryptocults, which believe that assets with no intrinsic value only move upward.
Everyone wants to believe there is an easier way to get rich, so the time they expect to make a profit has dropped dramatically. Newbie investors are especially guilty of this sin – they confuse short-term price increases with business quality. This is only amplified by all the FOMOs coming from the get-rich-quick crypto stories.
When the price of a stock starts to move strongly in one direction, it is usually due to the emergence of new information. If you can’t find new information, put it on a second litmus test. Is the stock moving randomly in all directions? If the answer is yes, you are most likely caught in a manipulation mine.
A short walk with SPIR
There are 351 shares in our catalog of technical stocks. Almost 18% (63) sspecial NSpersuade aacquisition ccompanies (SPACs), one of which is Spire Global. We first wrote about this action in an article titled Spire Global Stock Offers NanoS Satellite Pure Playand shortly after that we bought some stocks. It didn’t last long when we learned that Planet was planning an IPO – unfortunately also using SPAC.
We sold our SPIR shares for two reasons. First, because they played second fiddle after Planet. We are always looking for leaders in a particular area, and this is what we bet on. Second, because Spire Global did not complete the merger. As we said in the article about Why popular SPACs are fallingthe closure of such mergers is not guaranteed. There is always a chance that they can fail and you can suffer significant losses. A simple rule of thumb to protect yourself: if you are going to buy SPAC, wait for the ticker to change.
Whenever we decide not to invest in stocks, we don’t experience any FOMO if they jump. This is exactly what Spire Global shares have done.
WFT Happening to Spire Stock?
Imagine you bought Spire Global shares on the day of the merger at $ 10 per share. They traded around that price for any number of days after the merger, so let’s say you backed up your truck. And, as you well know, when you buy a stock, you always look at the price to confirm your decision. You know what we’re talking about, don’t you?
Let’s say SPIR shares went up one day. + 20%… You would love it, right? Well, suddenly SPIR has risen another + 13% the next day and one more + 15% the day after that. You would really love it, right? Well what if he took off + 22% the next day and then + 28% the next day? You would begin to identify yourself as the second coming of Nostradamus. In those five days, you would see your investment peaking. + 95% growth. But all this excitement would quickly disappear if it happened during the last SPIR trading session.
Now you will feel like complete shit. SPIR jumped + 95% and even with your insight of Baba Vanga, you didn’t have the strength to pull the trigger and catch this alpha. Now you almost fell -thirty% on your high tech stock and you are in doubt about your original decision. So, you decide to sell the next trading session just to see the stock price skyrocket. + 30%… So you buy back and it drops again, so you blah blah blah …
We’ve all been there. You are faced with stocks that are now being manipulated by day traders who feed on human emotions. In fact, calling these people “day traders” spits in the face of every BSD prop trader. It’s actually a bunch of baboons on Reddit posting this nonsense:
Sure, this guy / girl might resort to complex technical analysis to arrive at his conclusions, but the real winner here is the AI algorithm at Renaissance, which read this accusatory speech about 2 milliseconds after it was posted and is now running away from Robinhood weekday warriors as they step into every get-rich-quick deal they can find.
Let’s go back to the original story we started with – an investor who bought Spire Global stock at $ 10 a share and is now under water. -thirty%… What should this person do? This is a simple answer. You buy more and use dollar averaging because this bronzer will pay off for a while.
How low could SPIR shares fall?
For some reason, every investor has a moment when he thinks that the stock will not exceed some arbitrary target price level. “There is no way Spire Global shares will fall below $ 7 a share,” they said emphatically. Of course it can, because Spire Global is pretty expensive right now, at least according to our simple score.
- Market capitalization / annual revenue
1827 / 36.44 = 50
We do not buy stocks of companies with a multiple of more than 40, no matter how good their history is. If Spire Global were priced the same as Tesla – a simple score of 16 – then the stock would trade at $ 2.26 per share. Therefore, before you back up your truck, accept the fact that there is no reason Spire Global cannot trade up to these levels.
We are searching 1000 words for this article, and we have never spoken about Spire Global. We just discussed stock price volatility, which you should understand is a waste of time. This distracts from metrics that long-term investors should be looking at, such as income growth. Spire Global’s SPAC deck has promised us $ 56 million in revenue by 2021, and the first two quarters are showing a trend that’s going in the wrong direction.
Like all SPACs, Spire Global needs to live up to its praise by showing us its promised revenue growth. Let’s hope they cover the distance in the second / third quarter of 2021.
SPAC and volatility
It seems like a day later we find a new reason to avoid SPAC. A recent Wall Street Journal article (we do not link to paid articles) suggests that SPACs are now the final target of stock manipulators on Reddit, directing their minions to move stocks in the direction that suits them.
Quality stocks are not subject to such volatility because institutional investors will quickly step in and provide price support. This is why Johnson & Johnson (JNJ) has a stock chart that looks like this.
JNJ could possibly be one of the best stocks to own if you could only hold one share. JNJ has not only increased its dividend for 59 straight years, but also posted higher capital gains. Over the past 40 years, JNJ has returned + 6.958% versus S&P yield + 3 434% over the same period of time. It takes time in the market to get filthy rich, not time in the market. And, of course, this does not mean that you have to quit smoking cryptocurrency in order to gain a significant advantage over your peers.
Spire Global is one of 63 SPACs we reviewed. Like others, they made lofty promises for future revenue growth. Short-term price volatility does not give us confidence that the company will achieve its revenue targets. Right now, the trend is not our friend.
Investors who believe Spire Global is offering Planet a better deal should be encouraged now. You can buy a quality company at a discount. At the very least, you better hope it’s a quality product. Keep an eye on the important metrics, and you probably want to pick up some melatonin.
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