Take a look at the chart below of RIMM v Apple over the last 3 months. The outperformance is startling with RIM ahead almost 50% whilst Apple is down around 20%.
What is even more suprising is that the “anal”yst community in the US in particular is even more behind the curve than usual (and that’s saying something…). There’s an important lesson here for newer investors and that is quite simply that the analyst community is concerned about one thing and one thing only – their jobs. There are no prizes for going out on a limb and making a brave call as if you get it wrong you look like a fool v your peers and may in fact lose your job.
This is the reason why stock prices that make tops and bottoms display a repetitive pattern. At the peak or bottom there are pratically no dissenters as accepted wisdom is that the price will only continue one way. Questions over valuation etc get put aside and the herd cannot see beyond the current environment It is only when the smart money and insiders get in (our out at a top) and have an effect on the new price level that the analyst and mainstream investing community are forced to re-think their stances. The old “cause and effect” gets turned on its head. It is the stock price “effect” that “causes” investors to re-think their stance. As the price causes opinions to change then momentum builds in the new direction.
This is precisely the stage we are at now with RIM. Ardent bears like Peter Misek from Jefferies have been raising their price targets and moving from sell to hold stances, vainly chasing the price. There is a long way to go until the analyst community catches up however… Their collective and repetitive inability to think beyond the current numbers is the intelligent traders opportunity. As a commentator recently said in relation to RIM – who would you follow a seasoned and successful billionaire investor like Prem Watsa or a lowly analyst?
Opportunities exist today in the same vein in the Mining sector as the piece below relays.