Advances And Declines

Finance a la shmoop. What are overbought and oversold? Alright well the company

hair be back came out with a hair growth formula for men that actually worked on [Before and after shot of a bald head and then a head full of hair]

the head not the knuckles not the elbows not the feet not on the well you know..

anywhere else.. But actually on the head and it didn't look like transplanted

butt hair and of course the stock zoomed from ten bucks at its IPO to almost a [Stock prices from IPO to now]

thousand the only problem was, well the company was kind of running out of

bald heads to service. It was clear that growth would slow at some point in the [Pie chart showing bald men and men with hair]

next few years and maybe slow dramatically yet everyone loved hair be

back and while at the IPO the company went public at twenty times earnings it

now traded at eighty two times earnings and that multiple kept expanding well if [Price of earning keeps going up]

you looked for shares of hbb you'd find them in essentially every neutral fund

hedge fund index fund family office portfolio University endowment and

pension fund and well pretty much you name it everywhere everyone owned it. [Arrows pointing to everyone owning shares]

Only so many bald heads to shade though well these shares are overbought that is [Overbought stamp]

there was a much higher chance that from that point while they'd go down rather

than up alright does that mean they go down next quarter next year no not [Red cross appears on the calendar]

necessarily it's just that the supply-demand

equation here looks a bit scary especially if you were a trader playing

hot potato with a potentially highly volatile eighty two times earning stock [Trader on the phone]

that could get cut in half really quick and of course the same holds true for

the company bald no more whose Somalian division did in fact engage in fraud

they were convicted they had the evidence on video and had to pay a fine [Court gavel]

of 600 million Zimbabwean dollars or roughly 11 bucks U.S. but when news of

the fraud conviction hit shares of the primary US corporation went from about [Stock chart going down]

$200 a share all the way down to 40 where they sit today representing a

company with no debt fifteen dollars a share in cash and two dollars a share in [Company information is listed]

projected earnings this year assuming nothing

from Somalia well those numbers place the equity cap of the company at a

modest single-digit multiple of earnings about half the multiple at which this

growthy company had historically traded well the shares now are owned

almost nowhere just a fuel loyal concentrated value oriented mutual funds [A few mutual funds are shown on a map of the world]

own it and by the way they're all predicting three or four dollars a share

in earnings not two that's how we got that single-digit multiple there uh

nerd lingers. No hedge funds on it no endowments no pensions well the shares [Funds being crossed off a list]

have been yes oversold and likely they have upward pressure at least as driven [Oversold stamp]

by sentiment changes likely to hit when um you know that Somalian thing has long [Chart showing prices going up]

since passed and eeesh talk about something that'll put a little hair on your chest.. [Guy with a really hairy chest]

well, you don't necessarily want it there but you know...