The stock market has gone viral

Guest Blog by the Head of Growth at Mesha

“In the short run, the market is a voting machine. In the long run, it is a weighing machine.” - (The father of value investing and Warren Buffet’s mentor) Benjamin Graham.

As the stock market continues its bullish trajectory and the recent spree of IPO’s in the market continues to confound expectations, we see a new wave of young investors entering the market, keen to capitalize on or rather, not lose out on this unprecedented time in history.

As a country, India remains ravaged by covid. Restaurants, entertainment, hospitality obviously hit. However, disrupted supply chains have left every big industry feeling the pinch.

Our stock markets remain strangely disconnected from reality. A record number of IPO’s, all-time high stock prices go against everything traditional investors like Benjamin Graham and Warren Buffet preach.

So how does one make sense of it all? So where does it leave the brand new investor who is fresh out of reading Benjamin Graham’s ‘The Intelligent Investor’?

To understand this better, we go back to the source:

The stock market… must make its values first and find its reasons afterwards. Its position is much like that of a jury in a breach-of-promise suit; there is no sound way of measuring the values involved, and yet they must be measured somehow and a verdict rendered. Hence the prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions. - Benjamin Graham

So basically, we are at a stage where underlying company performance may not matter anymore. The fact that the stock price is high has nothing to do with fundamentals in the short term, but everything to do with Public perception of the companies prospects.

This allows for companies like Zomato to IPO with losses, unperturbed by fundamentals, but banking on public perception.

So how does one navigate this new dawn of finance, a world where a tweet from Elon Musk can change the course of Bitcoin, a group of people out for revenge can make a $3 stock rise by 8000% as was the case with Game Stop?

The answer: by being in touch with Public sentiment.

Investing has officially become social. Public perception, memes, and influencers have become real-time indicators of stock performance.

It is now important to measure things like sentiment by being part of finance and stock market communities, have real-time access to news and be able to interpret the role of opinion when evaluating stocks.

We have entered a brave new world where the next Warren Buffet or Rakesh Jhunjhunwala will be someone who not only understands fundamentals but also considers variables like financial influencers (like Elon Musk), social media perception, and real-time sentiment analysis.

The future of investing in social. Welcome to the future, welcome to Mesha.