

Single Tweet Sends Apple Shares Soaring - esalazar
http://www.wired.com/business/2013/08/single-tweet-sends-apple-shares-soaring/

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finnh
Icahn wouldn't be above sending a tweet like that to raise the price before
unloading shares. His goal is to maximize _his_ return, not that of his
twitter followers.

~~~
hamburglar
I kind of doubt blowing his credibility with a pump-and-dump is part of his
long-term plan for maximizing his return.

~~~
finnh
I'm not saying it's a pump-and-dump. What I _am_ saying is that Icahn (and
others like him) are very careful to hide their purchases from the market
_while they are still purchasing_ , in order to prevent their own purchases
from unduly raising the price.

If anything, Icahn's tweet signals that he is no longer purchasing AAPL in
quantity. Now he wants the market to "catch up" to his value appraisal so he
can realize a gain.

~~~
asdfologist
So... it's a pump-and-dump.

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ceejayoz
It's more likely to be a pump-and-keep, given his history.

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sbashyal
Technically, the single tweet did not send the shares soaring. A significant
investment from successful active investor Icahn did. The tweet just revealed
the investment to public.

Take Elon Musk's tweet that Tesla was being profitable for the first time as
an example. The tweet lead to soaring stock price but the cause was excellent
execution by Tesla team, not the tweet itself.

~~~
EvanKelly
In this case you're probably right, but lots of HFT algorithms do use Twitter
as a feed to inform trading strategies. Tweets can literally send stocks
soaring or sinking.

~~~
patmcguire
That's why Warren Buffet gets every time Anne Hathaway makes a movie.

[http://www.theatlantic.com/technology/archive/2011/03/does-a...](http://www.theatlantic.com/technology/archive/2011/03/does-
anne-hathaway-news-drive-berkshire-hathaways-stock/72661/)

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melvinmt
"But tweeting about a private meeting with the chief executive of a publicly
traded company not your own doesn’t feel like the use case the agency
anticipated."

Shouldn't this be the headline? Why isn't this considered as illegal insider
trading if the contents of the meeting are not disclosed?

~~~
cremnob
Investors have meetings with management all the time. Unless Tim Cook gave him
material non-public information about the company, it isn't illegal.

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bapbap
Just out of interest, does anyone know how long it took between the time the
tweet was published and how long it took for an identifiable/linked rise in
share price? The article does mention "Less than two hours later" but I'm
interested to know how quickly people react to a tweet like this.

Edit: Google Finance seems to suggest less than one minute. I'm not sure if
any data is freely available that would allow me to see this jump in the
seconds range.

~~~
grannyg00se
The initial response was within seconds. But the surge continued for minutes.
Well, the surge hasn't really stopped yet depending on how you look at it.

Looking at just one data stream.... The 21 seconds between 14:21:10 and
14:21:31 there were 23 trades. In the next SECOND at 14:21:32 there were 105
shares traded. And the price jumped, in that one second, more than the entire
previous minute. So I'd say 14:21:32 is when the market started reacting. Not
sure exactly when the tweet went out.

A search for nasdaq time and sales will get you the second by second data.

~~~
bapbap
Thanks for this, I find that amazing

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sologoub
Another proof of how emotional markets are (or rather people behind the
markets).

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slapshot
Icahn saying that a company is undervalued isn't meant as idle chatter. He has
in the past repeatedly tried to buy out companies that he has thought to be
undervalued. It seems shockingly unlikely that he'd try to LBO Apple, but if
there is one person who could do it, it'd be him. A buyout offer can drive
stock prices up 25% - 50+%.

The fact that the message came through Twitter rather than a press release
doesn't matter: the markets moved because Icahn is buying up Apple stock.

~~~
sologoub
The reason I would still call that an emotional, rather than logical response
is that these Tweets don't have much to base a valuation on. For example, what
is a "large" position or "larger" buyback in actual dollars? You have to
estimate and guess.

At the end of the day, Cook and Icahn may not agree on anything concrete and
all of this would have been vapor.

That said, it doesn't mean you cannot be opportunistic and make some money on
the ups and downs this thing generates.

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echohack
Sounds like a good time to pull out A Random Walk Down Wall Street again, for
the uninitiated: [http://www.amazon.com/Random-Walk-Down-Wall-
Street/dp/039333...](http://www.amazon.com/Random-Walk-Down-Wall-
Street/dp/0393330338)

I wonder how well tulip bulbs are doing these days.

~~~
cremnob
The investing success of value investors of all kind would not be possible if
the premise of his book, the efficient-market hypothesis, was correct. Warren
Buffett's track record is a repudiation of it.

~~~
btilly
Not necessarily. Warren Buffett's track record is helped by two major factors.

The first is that, being Warren Buffett, he gets opportunities that regular
investors don't. For instance look at the 2008 sweetheart deal he got on
Goldman Sachs. Any smart investor would have leaped at it, but the value to
them of saying, "Warren Buffett believes in us" was why he was offered the
deal instead of someone else.

The second is that Warren Buffett is a big fan of buying and holding
companies. Which leaves him in charge. By all accounts from the CEOs who
continue to work for him, he is a phenomenal manager. Therefore the fact of
his investing creates long-term improved returns.

When you move away from Warren Buffett, who else has been able to demonstrate
long-term returns above what mere chance says is likely for someone to achieve
by luck? In one study that I saw, there was only one other, Peter Lynch. The
odds that someone anywhere in the mutual fund industry would match him by
chance were under 5%. So there you have evidence that it is possible to beat
the market for the right person.

But what advice does Peter Lynch himself give investors these days? If you
want to invest in the stock market, buy and hold an indexed mutual fund!

Nobody seriously believes that the efficient market hypothesis is literally
true. However your odds of being able to identify and exploit such
inefficiencies in the broader market are sufficiently low that you are best
off acting as if it is.

~~~
clarky07
Anyone ascribing to efficient market hypothesis doesn't watch the market very
much. Was Apple really worth several hundred billion more last year than it is
now? Either it was extremely overvalued then, or it was extremely undervalued
at < 400\. Or both. There is nothing efficient about the market. It is
volatile and driven very much by emotion on a day to day basis.

Regarding Buffett, he doesn't take over everything. He buys and sells a lot of
stock where he doesn't take control, and he does very well doing that as well.
Also, he's being doing it for a long long time. This isn't simply flipping 20
heads in a row when you've been doing it for 60+ years

~~~
btilly
_Anyone ascribing to efficient market hypothesis doesn 't watch the market
very much._

Considering that the efficient market hypothesis came out of academics
studying the market, and has been tested in many ways, your hypothesis is
somewhat suspect.

 _Was Apple really worth several hundred billion more last year than it is
now? Either it was extremely overvalued then, or it was extremely undervalued
at < 400\. Or both. There is nothing efficient about the market. It is
volatile and driven very much by emotion on a day to day basis._

It appears that you do not actually understand the hypothesis that you reject
out of hand. The hypothesis is not that the market knows the true value of the
company, it does not. It is that the best available information on what the
price of the company should be is already integrated into the current company
price.

As information shifts just slightly about likely long-term prospects, the best
estimate of its price can move a lot. This is not news. Nor is the fact that
unavailable future information will change the price. Nor is volatility.

Now if you disbelieve the efficient market hypothesis, then fine. However any
inefficiency that you discover, once it becomes known, will naturally stop
working. I've seen this happen with several that I knew about. Over time the
efficient market hypothesis tends to work better and better.

~~~
clarky07
>It is that the best available information on what the price of the company
should be is already integrated into the current company price.

My point is that there hasn't been any news in the last year big enough to
warrant a several hundred billion dollar swing. There simply hasn't been. Just
changing emotions.

~~~
btilly
There hasn't?

The theory under which Apple justifies an insane valuation is the one where
they continue a constant stream of innovation, defining new products, keeping
everyone else guessing.

The simple fact that in the last year Apple has not delivered evidence that
they can continue to do that should justifiably weaken belief in that theory.
Which means that our best estimate of its future returns is far worse than
this optimistic scenario. Which means that we should give less weight to that
possibility, and therefore our best estimate of Apple's correct price is less
than it was.

Because of this where you see evidence that the market is not pricing
efficiently, I see evidence that you are not as smart as the market about
finding what price signals to pay attention to.

~~~
clarky07
>The theory under which Apple justifies an insane valuation...

Let's stop there. They have a PE of 7 ex cash. At the top, they had a PE of
about 15. Amazon has an insane valuation. Apple does not, and they didn't at
the peak. It was merely higher than it is now.

~~~
btilly
Let's not stop there.

Apple now has declining marketshare in existing business lines, and there is
some evidence that they don't know how to generate new profitable product
lines. A year ago neither was true, but there were worries about what the lack
of Steve Jobs would mean. So their valuation a year ago was high. Their
valuation now fits with a company that the market expects to decline.

Amazon by contrast has strong marketshare, increasing numbers of lines of
profitable business, and the market understands that they are not generating
profit because they keep starting up new potential lines of business that lose
money in the short run. They could become very profitable tomorrow if they
wanted.

I am not saying that the market's theory about either company is correct. Just
that these are theories that are widely held, which justify the stock prices
that you claim are simply wrong.

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cremnob
I've honestly been surprised by how long the market's dislocation has been on
this one. It's not common for a large cap stock that is highly covered by
analysts and watched by investors. But the market's fears about Apple are my
gain, and has become nearly 75% of my portfolio after tanking for the past ~9
months.

Value investors all saw the opportunity in AAPL, but it's nice to have a media
celebrity investor like Icahn act as the catalyst to reach fair value quicker.

~~~
mark_l_watson
Wow, 75% of your portfolio in one stock? I am more of a chicken investor:
hugely diversified over the US and International markets.

~~~
cremnob
Whenever this comes up I share this quote from Seth Klarman:

“Diversification for its own sake is not sensible. This is the index fund
mentality: if you can't beat the market, be the market. Advocates of extreme
diversification — which I think of as overdiversification — live in fear of
company - specific risks; their view is that if no single position is large,
losses from unanticipated events cannot be great. My view is that an investor
is better off knowing a lot about a few investments than knowing only a little
about each of a great many holdings. One's very best ideas are likely to
generate higher returns for a given level of risk than one's hundredth or
thousandth best idea.”

~~~
clarky07
While I totally agree, 75% is still pushing it. One might not have a hundred
or a thousand good ideas, but 5-10 doesn't seem out of the question. Apple is
also my biggest holding, but it is 1 of 10 and only 25%.

