Hello, this is Jua. I have some questions about theme stocks.
After discussing with GPT, it seems like not touching them would be the right call, but GPT doesn't always give correct advice either...
I'd appreciate advice from the experts.
I recently learned late about a ridiculous phenomenon where, as soon as Jensen Huang mentioned 'optical communication and optical semiconductors' at the GTC event, certain stocks achieved up to 6 consecutive daily limit-ups. Even after receiving a warning and being halted from trading for a day, they hit the daily limit-up again the next day.
Since they've already risen too much to jump in blindly, I first looked at the company information, but the results were shocking.
Most showed operating losses, net income deficits, negative ROE, and PER in the hundreds to thousands as a baseline. It was absurd.
PER is typically extremely high, often negative, and for some reason, many companies have no values at all.
(If a company is unprofitable, the PER should show as negative, but when there's no value at all, is the profit figure private information?)
Even if we were to pull forward several years' worth of future profits and approve them as multiples, it still doesn't make sense.
I could only think: 'Does it make sense for unprofitable companies or small businesses with only hundreds of millions to billions in net income to have market caps in the hundreds of billions to trillions?' (It might make sense, but since I'm a beginner, I'm asking because I might not know.)
Do these sharp rises usually happen only with market manipulation by organized groups? Or can retail investors' desires alone cause this to happen?
(Most of these stocks seem to show repeated patterns of sudden crashes and rallies on daily and minute charts, but I can't tell if it's mostly from profit-taking on scalp trades and chasing buys, or if it's really market manipulation to trap retail investors like the rumors suggest.
If I hadn't known, it would be fine, but watching these things happen next to me (even though I know I shouldn't), I got FOMO. The sharp rally seems to be in the mid-to-late stages, and I couldn't jump in because of the anxiety that 'if I buy, it will crash. The organized groups will pump up retail investors and then dump, leaving retail with all the losses,' but on the other hand, I can't shake the thought that 'I want to at least get a piece of this rally.'
After consulting with GPT, if a similar theme stock storm comes next time, the advice is that 'if you can get in on the first day, it's okay to catch one daily limit-up and then exit,' but I'm curious if this level is acceptable or if even this kind of advice varies depending on the situation.
I've heard that in the stock market, higher stock prices don't necessarily correlate with better fundamentals. Like how it seems like a beauty pageant as mentioned in new communities, calling it a 'popularity contest' seems to have some truth to it.
But the problem is that if I only buy stocks of companies with good fundamentals, I probably won't make big profits.
(Of course, it would be high risk, high return)
Are theme stocks treated as an entirely separate market, where trading is based more on popularity than fundamentals?
I'm curious whether Ang shareholders trade in theme stocks (even just a small percentage like 10% of their portfolio), or if it's an unwritten rule for regular investors not to touch them.
Some of these companies might achieve decent results in the future, improving their fundamentals, and then I might want to invest in them long-term. But if these dramatic surges at the beginning don't normalize afterwards, wouldn't it be difficult for a normal long-term investor to enter even with a slight decline? (I was shocked seeing a stock up 1,000% from its 52-week low, and now I've learned there are stocks up over 4,000%.)
I once heard about a solid company that failed because of price manipulation or these sharp rallies, and watching this situation makes me think about various things.
Thank you for reading this long post, and I'd appreciate advice from the experts.
