Applied learning happens when a person takes knowledge acquired from one area and adapts it to a different situation. I'm going to stretch that concept to the limit by suggesting that those who aspire to being true contrarians, that they could learn something from a routine done by comedian Ron White of the Redneck Comedy Tour.
To be a contrarian means to swim against the current, to be bold and buying when others are scared, and to run for the exits when everyone is rushing in to buy.
Easy to say, not so easy to do though. The herd doesn't panic without a reason. When investors start storming out of a stock there's typically some news that spooks them and starts the stampede. With PPHM that news was the release of their fourth quarter and fiscal year end results up to April 30th 2017.
The company reported higher than expected losses and the stock tumbled in after hours trading.
So what does this have to do with a routine by redneck comedian Ron White? Check out this video of an old bit he did and then I'll explain.
That's an abbreviated version, but it makes the point. Ron is describing a flight where there's engine trouble, forcing his plane to return ten minutes after taking off. In the full version he describes the aircraft as being as big as a pack of gum, with a velocity that's twice the speed of smell....so slow that they get passed by a kite.
That's not a bad metaphor for a highly speculative stock like PPHM and thousands of others. If you're going to hop on board a plane like this, you best not be a nervous flyer. Mr. White though, he has the perfect attitude for someone flying on a small plane or for someone investing in speculative stocks.
When an announcement is made that the plane has lost oil pressure in one of the engines, while everyone else is nervous....Ron, who's been drinking since lunch, doesn't care. "Take her down", is his remark..."And hit something hard, I don't wanna limp away from this piece of crap"!!!
I would argue that's a wise approach with development stage companies that have not yet attained, and may never attain, profitable operations. Obviously there's going to turbulence, "engine problems" and plenty of bumps and jolts. If you're going to be "losing your mind" like the young passenger next to Ron White in this little scenario....then maybe its best not to get on the plane in the first place.
You see it in social media all the time when bad news hits....posters come out of the woodwork moaning and bitching. No doubt many are disgruntled shareholders upset that their speculative little stock hasn't graduated to inclusion on the S&P 500 index.
But I sometimes suspect that there are others who are actually buying, and merely looking to influence others into giving up their seats. Buying because they're confident that the plane will right itself and not crash. It could be hedge fund type players planning on promoting the stock later in my opinion, perhaps knowing that while the past isn't pretty, that there's some positive news coming down the pipe that could get investors excited and buying again.
On the other hand, if social media is full of pump and promotion despite crappy performance...."Don't worry about those results, just wait til next quarter, or next year". When I see an abundance of that type of activity....as Scooby might say "Rut Roh".
Not a strategy for the faint of heart though....if you're playing with money you can't afford to lose, to extend the metaphor...plane crashes do happen.
PPHM has had its share of turbulence certainly, in early 2016 they halted a phase III trial which sent the PPS crashing from a split adjusted price around $7 to less than $3....those who gave up their seats to buyers lost out on the climb back above $5 though.
Now financial results up to April 30th have seen the PPS fall back below $5 to somewhere around $4.50 in after hours trading. So what does the future hold? Is it time to panic and get that parachute out? Or is it better to sit back and enjoy that scotch? Those results are almost 3 months old of course, the calendar I use says its the middle of July and not April.
Perhaps you've heard that old saw about the CEO asking his CFO..."How do the numbers look"? The CFO then says..."How do you want them to look"?
Anyway me and my friend Johnny Walker know what we'll be doing....take her down, go ahead....cause we don't care, we're just gonna sit back and enjoy the ride. All you nervous types read the disclaimer at the very bottom of this blog site, actually everyone should read it whether they're nervous or not.
Peace out.
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