[NOTE: I started writing this last Friday when GameStop closed at $325 per share. As of publishing today (Wednesday) it’s down 70% to $95/share.]
As you’ve probably seen over the last few weeks a bunch of “investors” on Reddit decided to bid up the stock of GameStop. And they were so committed that they actually succeeded.
GameStop was trading at around $17 per share when it all started. As of the close today, it’s STOCK is now worth $325 per share – a 1900% return in just 3 weeks!!!
Notice I said the “STOCK” is worth that much. The company, however, is not. And therein lies the lesson.
There’s only one way to invest. Anything else is speculating.
We only invest in companies (and therefore stocks) who are adding value to their companies and the world and the shareholders.
Speculating that someone else will pay more for our stock later (we hope) is not investing. That’s just Vegas with better odds. (Which is fine for fun money in your play account, but not your serious money.)
GameStop the stock is now worth WAAAY more than GameStop the company. And the people who made money in GameStop will likely lose it just the same.
As speculators take profits, they’ll sell it to the suckers who missed the boat and didn’t realize the party’s over. And then just as quickly as it went up, it will likely crash.
And instead of the SEC worrying about new regulations about how to prevent a massive bid up that hurts the shorts, they’ll be back to protecting Joe Schmoe who didn’t understand the rules of the game a lost a ton of money.
Only invest in companies that are adding value. That’s how Warren Buffet invests. And if it’s worked for the most successful investor in the history of the world, then it’s good enough for me.
Something tells me Warren Buffet didn’t buy GameStop.
Leave the speculation for other people (or your play account).