About two months ago, investors were hiding under their desks.
Inflation was at the highest it’s been in 40 years.
Interest rates were rising for the first time in more than three years.
And there was also the Russian invasion of Ukraine and higher gas prices.
Stock prices plunged.
The Dow Jones was down for over eight weeks in a row — its worst streak since 1923.
But after reaching a low for the year in mid-June, the stock market stopped falling.
Over the past few weeks, investors have crawled out from under their desks…
And have started buying stocks again.
You’d think that they’ve gotten a lot smarter, focusing on quality businesses.
But that isn’t the case.
Instead of buying shares of businesses that are showing profits, they’re buying lottery tickets…
Fools Rush In
It’s as if 2021 never happened.
Traders are buying like the bull is back.
Stocks like Bed Bath & Beyond Inc. (Nasdaq: BBBY) are skyrocketing.
I bought shares of Bed Bath & Beyond back in the early 2000s.
At the time, it was a category killer.
Its stock price was soaring and the company continued to knock it out of the park.
But then, Bed Bath & Beyond started facing heavy competition. Revenue slumped.
Today, the company’s collapsing and edging toward bankruptcy.
It hasn’t earned an annual profit since 2018 and has over $3 billion of debt and lease obligations.
And yet…
Its stock is soaring.
Nothing about the business has improved! In fact, the company is burning through cash.
But Bed Bath & Beyond’s stock rose from $5 early this month to around $20 per share this morning.
The stock is on pace to have one of its best months in its history.
On what planet does this make sense?
AMC Entertainment Holdings Inc. (NYSE: AMC) is also soaring.
Welcome to Meme Stocks 2.0
So far in August, both Bed Bath & Beyond and AMC have logged gains of at least 68%.
It’s as if investors never learned their lessons.
But here’s the thing: I know how this story will end. And you probably do, too…
Avoiding Disaster
These stocks will come crashing back down to earth.
Because eventually, the stock price will always trade in line with the underlying worth of the business.
So, don’t get sucked into buying something just because it’s going up.
That’s a one-way ticket to the poor house.
At the end of the day, price is what you pay, value is what you get.
Alpha Investors have been able to avoid disastrous losses because we don’t get caught up in all the hype.
We buy great businesses at bargain prices and let time do the rest.
That’s how we make money and sleep better at night.
If you’re an Alpha Investor, keep an eye out on your inbox for a new opportunity coming soon.
And if you aren’t yet a member, now’s the time to join so you can have the chance to get in on this opportunity, too.
Regards,
Founder, Real Talk