Today We Bust the Efficient Market ‘Myth’ – and LikeFolio Delivers an Ahead-Of-Earnings Stock to Buy Now
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This conventional wisdom includes things like:
- Asking an owner if it’s safe to pet their dog — so you don’t get bit.
- Looking both ways before crossing the street — so you don’t get hit.
- And washing your hands before you eat — so you don’t get sick.
Sometimes with horrific consequences.
Want an example?
“Playing dead” to show a mama bear you’re no threat to her cub will work fine if she’s a grizzly.
Do that for a black bear, however, and you could end up as a meal — since they’re known to stalk, hunt, and even kill people.
When it comes to investing, one of the deadliest pieces of common knowledge is something called the “efficient market hypothesis,” or EMH.
The EMH became popular in the early 1970s, and it’s something that I’ve crossed paths with many, many times in the decades that followed — as a business journalist, author, analyst, and stock picker.
In simple terms, the EMH says that every piece of information about a stock — public and private — is reflected in its price at any given moment. That would mean the playing field is perfectly level. It would mean there are no advantages to be had. And because stocks are always “fairly priced” at any given moment, it would mean there’s no way to beat the market.
EMH hardliners believe that the only way to invest is passively, with a low-cost portfolio like an index fund.
And we know that bit of conventional wisdom just isn’t true. Because if you believed that was the best way to invest, you wouldn’t be reading this right now. You and I both know that there are competitive edges to be had… edges that hand you market-thrashing windfalls.
Today we’re going to bust the efficient-market myth — and show you how our friends at LikeFolio can connect you with market-beating trades.
LikeFolio founders Andy and Landon Swan listen to the most important person of all — the consumer — and can give you an advance peek at the messaging that will accompany a company’s quarterly financial results.
Consumer spending drives two-thirds of America’s economic activity. It’s the consumer whose dollars act as the “votes” that determine which products and brands are the winners and losers. It’s the consumer whose spending on particular products or services can make or break a company’s financial results.
Imagine having that insight ahead of a company’s earnings announcement. That’s a bit of market intelligence that gives you a “first-mover advantage” with a stock or an options trade.
The efficient market hypothesis says that kind of intelligence doesn’t exist.
But LifeFolio knows that it does — if you know where to look or who to ask, as the Swan brothers, Andy and Landon, do.
They see what the consumer is saying directly via Twitter. Twitter is where consumers post and share their true feelings about the products and brands that get them excited… and those they’d prefer to avoid.
LikeFolio “mines” that data, deciphers what consumers are saying and feeling in real time, and turns that insight into opportunistic trades. And they do it before earnings are released, through such indicators as:
- Consumer Buzz — A tweet that mentions a specific company’s product or brand.
- Consumer Purchase Intent — A tweet that refers to a brand/product and includes a word or phrase that indicates a purchase is imminent. Someone saying they “Made reservations for our Disney World trip!” would count as a purchase-intent mention for Disney.
- Consumer Happiness — An indication of consumer sentiment toward a company’s product in a tweet. A post counts as a “positive tweet” if it contains a word/phrase that shows up on LikeFolio’s “trigger list” of upbeat mentions, and rates as a “negative tweet” if it includes a term from the Swans’ specific downbeat lexicon. Tweets that lack terms from either list are counted as “neutral.”
Like we’re going to do right now…
That’s right: I’m going to spotlight one stock where you can put this EMH-myth-busting, market-beating intelligence to use: Celsius Holdings Inc. (CELH), the energy-drink company whose beverages have gained traction with health-conscious consumers.
With ingredients like green tea, guarana seed extract, ginger root, and vitamins B and C — as well as a caffeine kick that stays below recommended daily maximums — these drinks allow consumers to quench their thirst and leave the guilt behind.
There’s a hot market for these cool drinks: Allied Market Research says sales will zoom from $45.8 billion in 2020 to a projected $108.4 billion in 2031 — a compound annual growth rate (CAGR) of 8.2%. Little wonder that snacks-and-soda giant PepsiCo Inc. (PEP) injected $550 million into Celsius back in August.
Celsius shares have been laggards so far this year; the stock is down more than 3% since Jan. 3 and nearly 3% over the last six months.
The efficient market hypothesis would have us believe that Celsius shares are fairly (accurately) priced right now.
But those stodgy EMH believers don’t have the “edge” that LikeFolio’s analytics provide.
The chart below reveals two important metrics about Celsius that hint a strong quarterly report could come on March 7:
- Consumers are not only more likely to have purchased — or be more interested in purchasing — Celsius than its competitors…
- But they are also happier with the Celsius product.
So, while Celsius’ share-price performance is underwhelming so far this year, the data mined by LikeFolio proves that folks aren’t disenchanted with Celsius beverages. Indeed, just the opposite is true.
Call it a “coup de grâce” shot to the EMH: This myth-busting exercise shows us that CELH may be INEFFICIENTLY priced. If the company replicates its revenue-growth patterns from the three prior quarters, Celsius could be in line for a blockbuster earnings report:
- Q1 2022 Revenue Increase: 167%
- Q2 2022 Revenue Increase: 137%
- Q3 2022 Revenue Increase: 98%
Once those results are reported March 7, everyone will have the same news to react to.
The “playing field” will be level.
But LikeFolio can give you that first-mover “edge” so you can act right now — either by setting up an options trade or by snagging some CELH shares to “go long.”