Big Companies don't fail because they don't have execution skills or management depth to execute the change. They fail because they refuse to change with times. That's why when these companies accept the market reality and change, the market rewards them like crazy. I have seen this trend in US market over and over again so many times that I have started calling this pattern: "Little Things Big Impact".
Let me share one example today just to illustrate this point:
Facebook IPO: Facebook had a disastrous start as a public company. Facebook came with its IPO on May 18, 2012, at a listing price of $38. By August 2012, the stock was down to $19. Why? Because it appeared to the market that company is not making serious efforts on mobile platform.
Facebook is a bubble and it will burst - Really..The basic definition of bubble is that no one calls it a bubble. That's when it is bubble
— Deepak Singh (@smarket) May 21, 2012
The main concern: How Facebook can monetize content on Mobile Platform?
Then, Facebook comes out with earnings report in July 2013...Look at the news flow (Mobile Focus)
It was an exciting news at that time-
Turnaround: Facebook stock jumped 30% yesterday. Market excited with company's mobile strategy. Mobile ads were 41% of total ad revenue
— Deepak Singh (@smarket) July 26, 2013
The stock rallied like crazy to $40 and see what happened after that....4x move in following 4 years
There is a very simple lesson: Even if you board the bus after a massive move, you can still ride a big move. Hence, Never Ignore "When companies do what is expected out of them" because then market rewards the stock like crazy. Facebook is a great example to remember this small lesson
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers