Happens so, so often. A great example (very YC suited!) is Apple's stock prices in January.
When Steve Jobs announced his medical leave just under two months ago, the Apple (AAPL) price opened the next day (Tuesday) down 5.44% on Friday's close price. The low point on Tuesday was 6.45% lower than Friday's close price.
While the price did go back up a bit that same day (the Tuesday close was only 2.25% lower than Friday's close price), it kept dropping for a few days. By the time the markets closed on Friday, AAPL's price was 326.72, down 6.24% in a week (compare that Friday close price to AAPL's lowest price on Tuesday, which was 326.00).
For some reason, investors were selling Apple stock because of fears over Jobs. This seemed ridiculous to me, and sure enough, in the (nearly) two months since then, the market has shown that I'm not alone in that view.
If you bought AAPL stock at that Friday closing price and sold right now, you'd be selling 8.21% higher than you bought. Even if you didn't time the buying quite as well, so didn't get it at such a low price, if you bought it at the opening price on Tuesday (the day after the Jobs announcement) you'd have made 7.30% profit, or if you bought it at the closing price on that same day and sold now, you would have made 3.79% profit.
So even with pretty shit timing on when to buy, just by having faith that Apple stock would bounce back, that's a very healthy rise in value over just two months.
The cause (I think) of the problem is two-fold. For starters, people are afraid that, if they buy back in too early, they will be too far ahead of the market and prices will continue to drop - obviously, they're hoping to be just a tiny bit quicker than the market, buying just before prices start going back up again quickly.
The second reason is basically the same, but with a different approach. Rather than wanting to avoid having your shares devalue immediately after buying them, it's a case of not wanting to buy back in too soon because, the lower the price you pay, the bigger the return once they have bounced back.
The thing is, what if Steve Jobs couldn't return to Apple at all? So market was pricing that possibility into the price of Apple stock.
There is a legitimate concern, that without Jobs to supervise things, in a year or two, the "magic" of getting the right product out at Apple would be gone.
Sure, Apple would still be making money, because Tim Cook is a great COO, but the "vision" would slowly fade.
Think, Microsoft over the last 10 years(stock basically has stayed put). Microsoft still makes money, but it has a lot of misses to show for its hits. Meanwhile, Apple has been hitting them out of the ballpark.
Remember, when you are buying Apple stock you are paying a premium on the expected growth.
And yet the stocks have bounced way up in under two months. The only way that wasn't going to happen was if Jobs died, or perhaps if he announced a permanent retirement. Neither of those things were going to happen so quickly after the announcement, otherwise they wouldn't have announced it the way they did.
So yes, the market was pricing that possibility, but it was obvious that in no time at all it would forget about it and go mad over the Apple's short-term future. Sure enough, it did.
When Steve Jobs announced his medical leave just under two months ago, the Apple (AAPL) price opened the next day (Tuesday) down 5.44% on Friday's close price. The low point on Tuesday was 6.45% lower than Friday's close price.
While the price did go back up a bit that same day (the Tuesday close was only 2.25% lower than Friday's close price), it kept dropping for a few days. By the time the markets closed on Friday, AAPL's price was 326.72, down 6.24% in a week (compare that Friday close price to AAPL's lowest price on Tuesday, which was 326.00).
For some reason, investors were selling Apple stock because of fears over Jobs. This seemed ridiculous to me, and sure enough, in the (nearly) two months since then, the market has shown that I'm not alone in that view.
If you bought AAPL stock at that Friday closing price and sold right now, you'd be selling 8.21% higher than you bought. Even if you didn't time the buying quite as well, so didn't get it at such a low price, if you bought it at the opening price on Tuesday (the day after the Jobs announcement) you'd have made 7.30% profit, or if you bought it at the closing price on that same day and sold now, you would have made 3.79% profit.
So even with pretty shit timing on when to buy, just by having faith that Apple stock would bounce back, that's a very healthy rise in value over just two months.
The cause (I think) of the problem is two-fold. For starters, people are afraid that, if they buy back in too early, they will be too far ahead of the market and prices will continue to drop - obviously, they're hoping to be just a tiny bit quicker than the market, buying just before prices start going back up again quickly.
The second reason is basically the same, but with a different approach. Rather than wanting to avoid having your shares devalue immediately after buying them, it's a case of not wanting to buy back in too soon because, the lower the price you pay, the bigger the return once they have bounced back.