In the world of investing, there are typically two types of methods to try to determine the future price of shares -value and growth stock. Both look at the fundamentals of the company and then you ask yourself are you paying for growth or value? If you are paying for growth you will pay more than if you are paying for value. The difference is if the company is on the way to profitability and is growing there should be more movement in the stock price upwards and downwards. in the past year, we seen another variable added, is this a meme stock?
Earlier this year, shares in GameStock, AMC and a couple of other stocks soared and then slowly came back down. The reason was connected to WallStreetbets website. Another stock which is now in the same type of valuation consideration is Robinhood.
In an article from Reuters, Robinhood which allows free trading and relatively easy to use app is now a public company. The shares went public with the normal publicity machine behind it, the professionals looking at the company from a fundamental point of view thought it was overvalued and the IPO went down. Then people on WallStreetbets talked about it and there was the ability to buy options and the shares jumped 82% to a high of $85, up from its IPO of $38 a share.
Only a few stocks can be meme stocks and an investor has to ask how does a company which charges no commission to trade make money? While it is wonderful for the investor to buy and sell at no commission where does Robinhood make money? Robinhood hopes to attract deposits, but at the moment it is a very good thing there is a bull market on Wall Street.
Linking to dividend paying stocks, at some point for every company dealing with consumers the issue will be how to make money from each consumer? Robinhood hopes in the future for the customers who make money to buy deposits or fee generating products which will diversify their income stream. When you do your homework, the reason to do it is which companies not to buy and which ones to consider. The result of your homework saves you money and one of the rules of investing is try not to lose money.
There are more questions than answers, till the next time – to raising questions.