is your glass half empty or half full?

Is your glass half empty or half full?

Actual share price on the stock market no longer reflects the true value or fundamental value or fair value of a company’s shares. Why? Simple answer: It is because of noise trading e.g., short selling, panic selling, market sentiment, speculation and investors’ confidence etc.

For example, shares of a company in mining or biotechnology or technology sectors could rise hundred times although this type of company keeps making losses every year without any real cash inflows derived from sales revenue. The shares of this particular company are miraculously traded significantly higher than its book value of equity with a very high price earnings ratio (PE). Why? Simple answer: some investors keep dreaming about huge potential future cash net inflows of this firm. They hope that one day, their dream will eventually come true. They keep pushing up the share price.

On the other hand, investors dumped Lynas that has a highly sophisticated manufacturing facility in Malaysia with a large deposit of rare earth minerals in Western Australia where those raw materials can be used to produce valuable finished products to the world.

Fact: Current share price of Lynas at 0.135 is traded below its book value of equity (Total assets including fixed assets - all liabilities).

I know that shorters do not like this post because they expect Lynas share price will keep going down every day until below 0.10. However, I believe that long-term holders of Lynas know when will be the right time to average down their holding costs.

In a crisis or panic situation, we need to use our common sense and critical thinking rather than emotion. Do your own research. Gain or loss is in your hands. This is my personal opinion.