What happens if you combine the Hollywood and the stock market? You get the "Jenner Effect". This week, Kylie Jenner (from the Kardashians) tweeted about how she doesn't open Snapchat anymore, and her millions of followers agreed. Investors panicked and sold off the stock worrying if a celebrity like Kylie stops using Snap, advertisers will follow suit. SNAP's stock lost $1.3 Billion or 6.3% of its market value in one day, and we anointed this phenomenon as the "Jenner Effect".
Beyond the lolz of it, why is the Jenner Effect important? It reminds us that the stock market is unpredictable. It's tempting to believe you can find stock price patterns and predict when it would go up or down, but no human mind or computer algorithm can account for such Kylie's tweet.
An intelligent investor is one who understands that such Jenner Effects are always plausible and unpredictable. In response, the best strategy is to only invest in well-run companies, operating in organically growing markets. Even if a Jenner Effect occurs and drags the stock price with it, the strength of the company's operations and the size of its market opportunity will lead to long-term growth. As for SNAP, the fate of the company and the stock is unclear, until it gains the operational strength required to weather such storms. The lesson for the intelligent investors is that there is no escaping from Jenner effects, but an intelligent investor can outsmart them!
This week's featured Stock Card:
Other Stocks On Our Radar:
Thanks, H-w Lu, Milos Markovic, Ragini Elamanchi, and Kimberly Hunter from our intelligent investors' community for this week's Stock Card requests. Take a look at these Stock Cards by clicking on their logo:
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