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Single Tweet Sends Apple Shares Soaring
- sologoub 13y agoAnother proof of how emotional markets are (or rather people behind the markets).
- autotravis 13y agoRight. Swooning over a vacuous tweet by some investor. Almost like an instant pyramid scheme. And what's with uppercase "APPLE"? Did he mean AAPL?
- cinquemb 13y agoAnd all the money flying around today (its POMO Tuesday[0]) couldn't hurt either… [0] http://www.newyorkfed.org/markets/pomo/display/index.cfm http://www.newyorkfed.org/markets/pomo/display/index.cfm
- slapshot 13y agoIcahn saying that a company is undervalued isn't meant as idle chatter. He has in the past repeatedly tried to buy out companies that he has thought to be undervalued. It seems shockingly unlikely that he'd try to LBO Apple, but if there is one person who could do it, it'd be him. A buyout offer can drive stock prices up 25% - 50+%. The fact that the message came through Twitter rather than a press release doesn't matter: the markets moved because Icahn is buying up Apple stock.
- sologoub 13y agoThe reason I would still call that an emotional, rather than logical response is that these Tweets don't have much to base a valuation on. For example, what is a "large" position or "larger" buyback in actual dollars? You have to estimate and guess. At the end of the day, Cook and Icahn may not agree on anything concrete and all of this would have been vapor. That said, it doesn't mean you cannot be opportunistic and make some money on the ups and downs this thing generates.
- icebraining 13y agoOr the machines behind the markets.
- sbashyal 13y agoTechnically, the single tweet did not send the shares soaring. A significant investment from successful active investor Icahn did. The tweet just revealed the investment to public. Take Elon Musk's tweet that Tesla was being profitable for the first time as an example. The tweet lead to soaring stock price but the cause was excellent execution by Tesla team, not the tweet itself.
- xwowsersx 13y agoImportant point. Nicely said.
- martindale 13y agoYes, but now argue it in court.
- EvanKelly 13y agoIn this case you're probably right, but lots of HFT algorithms do use Twitter as a feed to inform trading strategies. Tweets can literally send stocks soaring or sinking.
- patmcguire 13y agoThat's why Warren Buffet gets every time Anne Hathaway makes a movie. http://www.theatlantic.com/technology/archive/2011/03/does-anne-hathaway-news-drive-berkshire-hathaways-stock/72661/ http://www.theatlantic.com/technology/archive/2011/03/does-a...
- aaronbrethorst 13y agoTrees falling in the forest, etc. etc.
- markbao 13y agoI think it's a combination of both. Icahn's investment in Apple was the reason that people found reason to invest, but that information was brought to people through the distribution channel of Twitter. So Twitter is an accomplice in this situation, since it acts as how that information got disseminated to an audience, which I think still counts for a lot since it could have been an important signal, but it without Twitter, not as many people might have not known about it. Not only that, but the fast dissemination of this information (due to the nature of Twitter) might have made the stock go up faster than a news article coming out a day later, being read at different times of the day.
- cremnob 13y agoI've honestly been surprised by how long the market's dislocation has been on this one. It's not common for a large cap stock that is highly covered by analysts and watched by investors. But the market's fears about Apple are my gain, and has become nearly 75% of my portfolio after tanking for the past ~9 months. Value investors all saw the opportunity in AAPL, but it's nice to have a media celebrity investor like Icahn act as the catalyst to reach fair value quicker.
- mark_l_watson 13y agoWow, 75% of your portfolio in one stock? I am more of a chicken investor: hugely diversified over the US and International markets.
- hkmurakami 13y agoboth approaches are totally fine. just depends on your objectives and volatility tolerances.
- cremnob 13y agoWhenever this comes up I share this quote from Seth Klarman: “Diversification for its own sake is not sensible. This is the index fund mentality: if you can't beat the market, be the market. Advocates of extreme diversification — which I think of as overdiversification — live in fear of company - specific risks; their view is that if no single position is large, losses from unanticipated events cannot be great. My view is that an investor is better off knowing a lot about a few investments than knowing only a little about each of a great many holdings. One's very best ideas are likely to generate higher returns for a given level of risk than one's hundredth or thousandth best idea.”
- clarky07 13y agoWhile I totally agree, 75% is still pushing it. One might not have a hundred or a thousand good ideas, but 5-10 doesn't seem out of the question. Apple is also my biggest holding, but it is 1 of 10 and only 25%.
- echohack 13y agoSounds like a good time to pull out A Random Walk Down Wall Street again, for the uninitiated: http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338 http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/039333... I wonder how well tulip bulbs are doing these days.
- cremnob 13y agoThe investing success of value investors of all kind would not be possible if the premise of his book, the efficient-market hypothesis, was correct. Warren Buffett's track record is a repudiation of it.
- czr80 13y agoI don't think the (strong) version of the efficient-market hypothesis is defensible but Warren Buffet's track record is not proof that it is wrong - in a random market, given a large number of investors, some will do well purely by chance.
- aprescott 13y agoNot necessarily refuting what you're saying, but here's an interesting take on "purely by chance" from Buffett, by analogy of coin flipping and getting a run of heads: http://www.tilsonfunds.com/superinvestors.html http://www.tilsonfunds.com/superinvestors.html
- czr80 13y agoThat's a great article, thanks. I actually had the coin example in mind when I wrote the comment, but was too busy to write out the full argument!
- btilly 13y agoNot necessarily. Warren Buffett's track record is helped by two major factors. The first is that, being Warren Buffett, he gets opportunities that regular investors don't. For instance look at the 2008 sweetheart deal he got on Goldman Sachs. Any smart investor would have leaped at it, but the value to them of saying, "Warren Buffett believes in us" was why he was offered the deal instead of someone else. The second is that Warren Buffett is a big fan of buying and holding companies. Which leaves him in charge. By all accounts from the CEOs who continue to work for him, he is a phenomenal manager. Therefore the fact of his investing creates long-term improved returns. When you move away from Warren Buffett, who else has been able to demonstrate long-term returns above what mere chance says is likely for someone to achieve by luck? In one study that I saw, there was only one other, Peter Lynch. The odds that someone anywhere in the mutual fund industry would match him by chance were under 5%. So there you have evidence that it is possible to beat the market for the right person. But what advice does Peter Lynch himself give investors these days? If you want to invest in the stock market, buy and hold an indexed mutual fund! Nobody seriously believes that the efficient market hypothesis is literally true. However your odds of being able to identify and exploit such inefficiencies in the broader market are sufficiently low that you are best off acting as if it is.
- finnh 13y agoIcahn wouldn't be above sending a tweet like that to raise the price before unloading shares. His goal is to maximize his return, not that of his twitter followers.
- hamburglar 13y agoI kind of doubt blowing his credibility with a pump-and-dump is part of his long-term plan for maximizing his return.
- finnh 13y agoI'm not saying it's a pump-and-dump. What I am saying is that Icahn (and others like him) are very careful to hide their purchases from the market while they are still purchasing, in order to prevent their own purchases from unduly raising the price. If anything, Icahn's tweet signals that he is no longer purchasing AAPL in quantity. Now he wants the market to "catch up" to his value appraisal so he can realize a gain.
- asdfologist 13y agoSo... it's a pump-and-dump.
- ceejayoz 13y agoIt's more likely to be a pump-and-keep, given his history.
- grannyg00se 13y agoAnd he's not even trying to hide it. "We currently have a large position". That means no longer purchasing, it has been done.
- mik3y 13y agoWhat I find interesting is Icahn filed a press release yesterday, basically telegraphing his intention to post juicy bits like this to Twitter: NEW YORK, Aug. 12, 2013 (GLOBE NEWSWIRE) [..] Our Chairman, Carl C. Icahn, intends to use Twitter from time to time to communicate with the public about our company and other issues. [..] It is possible that the information that Mr. Icahn posts on Twitter [..] could be deemed to be material information. Source: http://www.ielp.com/releasedetail.cfm?ReleaseID=784592 http://www.ielp.com/releasedetail.cfm?ReleaseID=784592
- melvinmt 13y ago"But tweeting about a private meeting with the chief executive of a publicly traded company not your own doesn’t feel like the use case the agency anticipated." Shouldn't this be the headline? Why isn't this considered as illegal insider trading if the contents of the meeting are not disclosed?
- cremnob 13y agoInvestors have meetings with management all the time. Unless Tim Cook gave him material non-public information about the company, it isn't illegal.
- bapbap 13y agoJust out of interest, does anyone know how long it took between the time the tweet was published and how long it took for an identifiable/linked rise in share price? The article does mention "Less than two hours later" but I'm interested to know how quickly people react to a tweet like this. Edit: Google Finance seems to suggest less than one minute. I'm not sure if any data is freely available that would allow me to see this jump in the seconds range.
- clarky07 13y agoYeah it was pretty much immediate. The volume surge was huge.
- grannyg00se 13y agoThe initial response was within seconds. But the surge continued for minutes. Well, the surge hasn't really stopped yet depending on how you look at it. Looking at just one data stream.... The 21 seconds between 14:21:10 and 14:21:31 there were 23 trades. In the next SECOND at 14:21:32 there were 105 shares traded. And the price jumped, in that one second, more than the entire previous minute. So I'd say 14:21:32 is when the market started reacting. Not sure exactly when the tweet went out. A search for nasdaq time and sales will get you the second by second data.
- bapbap 13y agoThanks for this, I find that amazing
- rch 13y agoWouldn't the trading algorithms be tuned to amplify a price move for AAPL in particular? What if the subject had been Caterpillar?
- deleted 13y ago[deleted]