Thanks for the update…
There are some observations related to stocks or sectors that have gone out of favour that I had made multiple times on different threads.
Usually what happens is that when an IPO comes around, all its virtues and positives are displayed in full fanfare. Because investment bankers have the mandate to get as much juice out of it as possible, so these IPOs are priced at really fancied valuations. And to get these IPOs across the gullible public, a strong narrative is needed, which is provided (knowingly or unknowingly) by a whole array of players including brokerage houses, Whatsapp and other social media superstars, IPO roadshows, TV channels, you name it.
These antics usually get the IPO through and the crowd cheers it with blockbuster listings. Stock prices rally hard irrespective of business prospects and valuations, and a lot of innocent retail folks (and often well learned fund managers) get sucked into the story. And after a brief period of time, usually a quarter or two of disappointing numbers, the cookie begins to crumble. Stock price initially starts showing signs of distribution, where the smart folks who can read in between the lines start selling out. And once their selling is over, the real cracks appear.
And all this while, the initial narrative keeps ringing, and sometimes if price achieve some sort of equilibrium with business prospects after falls, there is a rally. But at each higher level there are guys stuck with positions who have no idea about the business, (and who have bought on tips or on whims ) are ready to supply which causes stock price to correct again.
Since there is shortage of confidence in the company because of the disappointments it has caused, stock price keeps making lower lows, sometimes even when markets stage strong rallies. I guess the prudent course is to allow the stock price to settle down for some period of time, maybe months or quarters and see if some bottoming patterns have emerged and/or study the business with an open unbiased mindset and then take a call.
These kind of fancied IPOs can act as double edged swords, After these bite the dust, there is a fertile ground for picking really good winners from these. It does require high level of digging and work, but results are often satisfying. For the lesser skilled folks, stock price crossing the post IPO highs is often the simplest signal to latch on to these.
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