Let’s play a game. Which one are you buying?

• Twitter – TWRTQ or TWTR?
• Ford – FORD or F?
• Zoom Communications – ZOOM or ZM?
• Nest (Thermostat) – NESTL or NEST?

Answers below!

THE BRIEF

The global quarantine led to a major increase in demand for video conferencing services.

• In March, investors confused ZOOM Technologies (ZOOM) with Zoom Video Communications (ZM), causing ZOOM Technologies to surge by 1500%.
• PRO TIP: Don’t let FOMO drive an investment decision; do your homework, understand what you’re buying, and make sure you’re buying the right stock.

Answers:

• Twitter: TWTR [During Twitter’s public stock offering in 2013, Tweeter Home Entertainment skyrocketed 1,800%]
• Ford: F
• Zoom: ZM
• Nest: Trick question, it was neither. Nest Labs was never publicly traded, but still shares of penny stock, Nestor (NEST), soared after Google announced in 2014 it was buying Nest Labs

THE EXPLANATION

Irrational investors often rush to purchase these stocks after big events. Once investors realize their mistakes, the price surge is almost always followed by a price crash. In the case of Zoom, the situation was so bad that the “police of the stock market”, SEC, decided to step in and stop all trading in Zoom Technologies to protect investors from buying the wrong stock.

THE ACTION

In the midst of making a big decision, doing a little homework can go a long way. In order to beat the market, you have to outsmart the market. Investing during a crisis can be lucrative if done correctly.

Follow the advice of our good old friend, Warren –

“I will tell you how to become rich… Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffet, The Investing Guru