Investing into public stock can be a risky endeavour, but not if you keep it simple and follow the right recipe. Let’s look at a recent example, where a competent investor made an investment on a Friday and generated a 10+% profit (about € 500,000) just over the weekend. And that without spending any money, without taking any significant risk, just by being brilliant with one core skill: predicting the near future.
So, here is the recipe:
- A small-sized crystal ball that can predict just a few days into the future
- Borrow some Sinch stock (x shares) from your trusted broker; no capital expenses needed
- Sell the x Sinch stock on the market and get about € 5million for that
- Enjoy a wonderful weekend with family, friends and some charity event
- Observe that the stock falls on Monday just as you saw it in your crystal ball, by more than 10%
- Buy x Sinch stock in the market for about €4.5 million
- Hand this x stock back to your trusted broker
- Pocket a profit of €500,000 from this simple process
- Go back to golfing until your feel a desire to make more money
How would that look like in transaction information?
On Friday, Jan 27, 2023 increase short position from 1.26% of Sinch value to 1.39%.
On Tuesday, Jan 31, 2023, decrease short position from 1.39% of Sinch value to 1.26%.
Source: Short seller registry at https://www.fi.se/en/our-registers/net-short-positions/emittent/?id=549300UXY7QM6IDCGI12
Let’s take a look at the Sinch stock curve for these days:
Quite easy to read: the curve ist higher before the closing of the stock market on Friday afternoon and drops on Monday morning with lots of trading during the whole day.
Question: So, what happened on this Monday morning?
Answer: A big bank issued their Sinch update report explaining why the stock is overvalued (with my mathematical background, I am not too impressed by the logic used in this analysis, but that’s worth another post at another time).
Question: Why did not everyone short the Sinch stock on Friday, given that it is obvious that the analyst report would negatively impact the stock price?
Answer: Many investors are just stupid or reckless or lazy and don’t use crystal balls. And then they complain about their bad luck, right?
Conclusion: Investing into public stock requires competence and sophisticated use of magic devices. Who does not have such skills, should rely on analyst advice and reports from finance media.
Bonus Question: Why does the Sinch stock recover from the negative analyst report in just a few days?
Bonus Answer: The Market is always right!!
Does that logically mean that the analyst report was not right? Very confusing, isn’t it? 🙂
Extra Bonus Question: I can’t afford a crystal ball, but find it acceptable to make a profit of only €100,000 over a weekend. Couldn’t I get the info about an upcoming analyst report and its public company assessment also a few days earlier?
Extra Bonus Answer: Analysts are very customer friendly entities. Please contact the authors of the report directly.