I always have my ear to the ground for hyped up stocks, and Momo Inc (Nasdaq MOMO) is the latest to pop up on my radar.
It caught my attention in the usual way, being touted by one of those outfits that sends out email blasts. Quite often shops that pump stocks via email, they churn through them pretty quick....claiming to be a swing trading or momentum group. Still they hype the fundamentals and often give the impression that the companies they're touting, that they're solid long term investments.
When it comes to the markets I think its important for individuals to decide whether they want to focus on trading or investing. For those looking to invest I would suggest that greater caution is needed, with a deeper look at fundamental performance and valutations. Traders conversely should focus more on price volume movements and the technical picture, worrying less about a company's long term prospects for success or failure.
After all, any stock can catch fire....and often its those grossly overvalued companies, or those with less than stellar fundamentals, that make the biggest short term gains. Players with a long term investment perspective often storm into a stock excited about future "potential" focusing on things like revenue growth, while ignoring things like current valuation and expenses. Newbie investors see a stock climbing and think it will keep on going.
You're not limited however, you don't have to be either a short term swing trader or someone with a buy and hold strategy, you can do both. You can decide that some stocks are worthy as long term holds, while viewing others as trading vehicles. But I would argue that if you're looking at a stock as a trading vehicle, that it helps to have others who "drink the Kool-Ade" and believe in the long term prospects.
So what about MOMO?
Momo Inc is a Chinese based company, and I've seen the market fall in love with Chinese stocks before. LEJU and MOBI spring immediately to mind. Both made substantial gains and then collapsed.
According to WSJ.com MOMO has 143.7 million shares outstanding and a market cap of over $3 billion USD. The PE ratio on that site is reported at an eye popping 195.61 based on EPS for the trailing 12 months of $0.08 cents.
Momo is a Chinese social networking company, and if you haven't heard of it that shouldn't come as a surprise. That's because Communist China doesn't allow social networking sites like Facebook and Twitter. In fact the entire Chinese market can almost be equated to an intranet as opposed to the world wide internet. I've heard the Chinese net referred to as a lagoon off the greater internet ocean. Still its a massive lagoon with close to 1 billion users, more than double the entire U.S. population.
Here's a link to an article which lists the "Top 10 Chinese Social Media Sites":
Interestingly, Momo Inc is not on it.
Doing a google search of top social media companies and platforms in China I don't find Momo Inc anywhere. The big player, one that I had already heard of and seen videos about, is WeChat which seems to combine Face Book, Twitter, Instagram, E-commerce and more all into one app.
Doing a google search of top social media companies and platforms in China I don't find Momo Inc anywhere. The big player, one that I had already heard of and seen videos about, is WeChat which seems to combine Face Book, Twitter, Instagram, E-commerce and more all into one app.
Of course if you're simply looking to flip a stock based on momentum, swinging in and out on the tips and dips, then none of the fundamentals really matter. Excepting of course that those looking to dump on the highs need others buying and when those highs are achieved.
Looking at the chart there have been plenty of chances as MOMO has swung wildly since in began trading in late in 2015, fluctuating between $19 on the high end and $7.50 to the down side. As I often repeat though, its a zero sum game. Those looking to trade shares for money on the highs need others willing to trade their cash for shares.
For those interested in the social networking space in the Chinese Market I would suggest a look at Tencent Holdings Inc. the owner of WeChat and China's most valuable tech company as per a report on CNBC this past week. Tencent trades in the US on the OTC foreign exchange with the symbol TCTZF.
When it comes to riding momentum and swinging in and out of a stocks its almost like that children's game "hot potato" where a potato on spoon is passed around while music plays. The kid left holding the potato when the music stops loses and is kicked out of the game. With stocks those that buy the highs before the promotional music stops and the bottom falls out...they don't get kicked out of the game until they've gone broke.
It would seem to me that those holding a hot potato with a PE ratio nearing 200, that they might just be looking to pass it along before the music stops playing. That might explain all the buzz and chatter for MOMO on stock boards and social media sites.
It doesn't make sense to start pounding the table and ringing the dinner bell for buyers unless you're looking to sell.
It doesn't make sense to start pounding the table and ringing the dinner bell for buyers unless you're looking to sell.
Disclosure: I have no position in any of the stocks mentioned here although I might look to go long on TCTZF.
