When a company does well, it is natural to expect stock price to go up to reward investors who have bought in before the good news. However, we all know that this is not the case for many companies. In fact, we have seen companies which were unprofitable for years, yet their stock prices continue to stay resilient with healthy price movements. Does that mean that fundamental analysis is no longer useful? As an investor who wants to sleep peacefully at night, I believe that stock fundamentals are still important to every investor but if their prices are not tagged to performance, does this mean that we will all have to stay browsing through Reddit pages and waiting for the next big hype? In today’s post, I will not stress on the injustice in the world but will focus on showing some simple examples on how fundamental analysis have failed us.

Example 1

Revenue and net profits have surged considerably but stock price continue to stay muted for the time being. While this might be argued as an isolated case and there are deeper underlying reasons why the price is trending as such, this example clear shows how unreliable a company’s performance is in relations to its stock price. As a vested investor, I am not so much concerned that the price is low, I can always buy it at the current price before value is discovered but some other eager investors might not be so interested in a slow to respond stock.

Example 2

Take a look at another company that has just realised its 1H results ending 30 June (similar to Example 1), the price has been hovering around the same level and there has been little to no interest in buying this stock despite making significant improvements to revenue and net profit. First thought that might go through our minds is, have the world gone mad? But a more serious question would be, what will this company do if its stocks are so much cheaper than its actual company value. By the way this company’s price to net asset value is at 0.6.

Are we all stuck in a hyped up world?

Maybe the word viral might be a bit outdated but if being viral in a vaguely positive way is the only way to make stock prices climb aggressively, then moving forward, what is the sustainable way to invest? Are we then suppose to subscribe to viral channels on X or Reddit and just wait for the next payday? My advice to you guys is to ignore all those news that you know does not last. Yes, prices move and sometimes people do get rich fast, by all means, otherwise, wait patiently for value discoveries. Look at the bottom for one example.

Closing Thoughts

To all young readers struggling to accumulate capital, do not be rash, stay calm and wait for the right pay day. Whatever you learn from investing and trading should always be sustainable and a positive influence to your investing journey. Try your best to turn away from get rich quick mentalities and I assure you that you will appreciate price and value much better in the long run.