Unjustified Valuations are Illogical
I just read the article (http://www.fool.com/investing/2016/10/09/intel-corporation-stock-surges-to-multiyear-high-n.aspx) about my old company and it frustrates me because, yet again, the price of Intel stock is not justified.
Over my ten year career at Intel, I saw the stock linger in the high 20’s. Many, many times we had excellent earnings, technological opportunities, marketing, sales yet the price never moved. Unlike what college students will hear in their Finance 101 class, there is absolutely no logic to the pricing of stocks nowadays. As a public company, you can do almost everything right and still not earn the validation of investors. Yet, like in the dot com days, you could do everything wrong and get rewarded.
I know, I know… the market is not based on logic but I would expect some degree of non-emotional behavior to go into investments. Based on what I see in the market today, a company is rewarded for doing poorly. Maybe that isn’t reflected in the financials but it is reflected. Just look at the twitter posts and news over the past year from my old company. I challenge you to find evidence that shows they are truly driving technology like they did in years past.
Does Intel have high expectations to succeed? Yes. Are their financial solid? Yes. Am I seeing news about Intel, in my mind, that demonstrates they are in a position to succeed? No. Has Intel been undervalued in the past? Yes.
Obviously, stock prices are based on expectations but sandbagging expectations, no matter how you do it, is sure one hell of a way to create tremendous upside. I guess I still believe in investing in companies that are doing the right things right. That was definitely something Intel used to do but I am not so sure anymore. That is why I sold my shares last year and why I write this article today.
I suppose I believe in the following… (the idealist)
strong financials + good products + good service + good awareness = increasing stock price
What is actually happening… (the sandbag effect)
decent financials + okay products + okay service + okay awareness = increasing stock price