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The LiveTiles Ltd (ASX: LVT) share price has been a strong performer on Wednesday.

In afternoon trade the intranet and workplace technology software company’s shares are up 17% to 24 cents.

Why is the LiveTiles share price storming higher?

As we covered here earlier today, LiveTiles requested a trading halt this morning amid media reports that private equity firms were interested in launching a takeover approach.

The report claims that the low multiples its shares trade on relative to its peers have caught the eye of international investors.

This afternoon the company confirmed that it receives unsolicited approaches by parties interested in exploring a corporate transaction from time to time.

However, it advised that it is not currently in formal discussions in relation to a control transaction with any third party and will inform shareholders as required under its continuous disclosure obligations.

It also confirmed that it has engaged Credit Suisse and Gilbert & Tobin to advise the company on any potential control transaction should one happen.

Why is the LiveTiles share price underperforming?

There appear to be a number of reasons for the weakness in the LiveTiles share price. One of those is the company’s growth, which has failed to live up to expectations.

In February 2019, LiveTiles stated its aim of organically growing its ARR from $30.9 million to at least $100 million by 30 June 2021.

A year later, the company had dropped the word “organically” but advised that it “continues to pursue its short-term target of $100m in ARR and sees significant market and growth potential beyond this level.”

However, this target has now disappeared without any commentary on the matter. At the end of the second quarter, LiveTiles’ ARR stood at $64.7 million, which is well short of its June 2021 target of $100 million with just a few months left to go.

Another concern has been the company’s cash burn. During the second quarter, LiveTiles posted a net cash outflow of ~$13.6 million, leaving it with just $19.2 million in the bank.

And while $9.8 million of this related to one-off legal and litigation fees, investors appear concerned that LiveTiles will require some form of capital injection in the near future. This may be weighing on investor sentiment somewhat.

More reading

• LiveTiles (ASX:LVT) shares placed in trading halt
• Why Bigtincan, Bubs, LiveTiles, & Treasury Wine shares are storming higher
• Why the LiveTiles (ASX:LVT) share price is avoiding the market selloff
• What’s in store for the ASX tech sector in 2021?
• How to invest in ASX shares in a post-COVID world 

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of LIVETILES FPO. The Motley Fool Australia has recommended LIVETILES FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The European Metals Holdings Ltd CHESS (ASX: EMH) share price is currently trading at $1.30, up more than 12% so far today. European Metals shares went through the roof following the company’s announcement regarding a private placement worth $7.1 million (before costs). 

European Metals is an Australian and UK-listed mineral exploration and development business. The company is actively pursuing its Cinovec Lithium Project.

The Cinovec Project is located in the Krusne Hore Mountains which divide the Czech Republic from Germany. According to European Metals, mining in this historic region dates back to the 1300s.

The company is presently endeavouring to become one of the lowest carbon footprint producers of battery grade lithium hydroxide and lithium carbonate in Europe.

European Metals share price boosts on $7 million placement news

The European Metals share price is on the move today as the market digests the company’s placement news. According to today’s announcement, the placement includes a significant $5 million contribution from the Luxembourg-based green energy fund, Thematica Future Mobility.

Thematica Future Mobility is a UCITS (Undertakings for the Collective Investment in Transferable Securities) fund with exposure to companies that are focused on, or will substantially benefit from, the transition to clean and sustainable transportation and energy storage solutions.

European Metals announced that it has received “firm commitments” for a placement of approximately 6.45 million CHESS Depository Interests (CDIs) at an issue price of $1.10 per CDI to raise the $7.1 million.

Placement proceeds will support the further development of the company’s Cinovec Lithium Project. According to the company, Cinovec contains the largest hard rock lithium deposit in Europe.

The Cinovec Project is fully funded to final investment decision with approximately 26.7 million euros.

The future of electric vehicles in Europe

Commenting on its investment in European Metals, a Thematica representative said:

The strong growth in European EV sales and the rise of domestic battery cell production is going to require substantial lithium supply in the future. The European Raw Material Alliance (ERMA) has stated its ambition is to have 80% of lithium supply sourced locally – we see European Metals Holdings, that should reach final investment decision in early 2022 post the completion of a definitive feasibility study, as one of the first producers of battery-grade lithium chemicals on the continent and given its large resource, a meaningful contributor to the ERMA target.

Over the past 12-month period, the European Metals share price is up approximately 268%.

More reading

• These 3 ASX mining shares are top risers today

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Amazon.com Inc (NASDAQ: AMZN) shares continued to rise in after-hours trading this morning (our time), despite news that Amazon founder and CEO Jess Bezos will be stepping back from the company.

This morning, we reported the shock news that Mr Bezos, who has lead Amazon since founding it way back in 1994, is planning to step down as CEO later this year. Mr Bezos will move to the less-active ‘executive chair’ role, while the head of the fast-growing Amazon Web Services Andy Jassy will step up to the CEO position.

Amazon and Bezos

Mr Bezos has long been synonymous with Amazon. After being the ‘brains behind Amazon’ as its founder, he has headed the company for its entire history. He has also become the world’s richest person in the process, a title he has held on and off for years now. That’s despite having to split his massive Amazon stake in a well-publicised divorce a few years ago with ex-wife Mackenzie Scott.

According to Forbes, Ms Scott is now one of the richest people in the world, and the world’s third-richest woman with a fortune of close to US$60 billion. However, Jeff Bezos remains the wealthiest person in the world with a fortune of US$196 billion after a recent brawl with Tesla Inc (NASDAQ: TSLA) CEO Elon Musk for the title.

In the announcement, Bezos stated that “as exec chair, I will stay engaged in important Amazon initiatives”. But he also flagged that he is now more excited to spend some of his time on other projects like “the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions”.

The king is dead…

But investors don’t seem too fazed by this momentous changing of the guard at Amazon. In fact, Amazon shares closed 1.11% higher for the US trading day, including up another 0.3% after hours after the announcement was made.

At the current eye-watering stock price of US$3,380, the company is up 6% year to date, and up more than 68% over the past year. Since 1997, Amazon shares are up a mind-blowing 195,275%. That return would have turned a $1,000 investment at the time into almost $2 million today.

However, Bezos’ departure wasn’t the only news out of Amazon today. The company also announced its quarterly results for the quarter ending 31 December 2020 this morning.

This report included massive beats on sales and net income. On the former, Amazon crossed US$100 billion in sales for the first time ever in a quarter. On the latter, Amazon announced US$7.2 billion in net income, up from just US$3.3 billion over the same period in 2019. That was clearly enough for investors to adopt a ‘the king is dead, long live the king’ attitude.

More reading

• Jeff Bezos quits as Amazon CEO
• GameStop (NYSE:GME) dominates the US shares ASX investors have been buying
• Forget growth or value: Here’s a neutral way to pick shares
• Amazon Prime membership is growing at a record pace
• Better buy: Amazon.com vs. Google

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Securities in Core Lithium Ltd (ASX:CXO) have entered voluntary suspension after the company released an announcement earlier today.

What did Core Lithium announce?

Core Lithium released an announcement informing investors that the company has requested a voluntary suspension.

According to the media release, Core Lithium has requested that securities remain in voluntary suspension. This will be in place until an announcement is released to the market regarding a share placement.

The media release noted that an announcement is expected no later than 4 February, 2021.

In a previous trading halt request on 1 February, Core Lithium had advised investors of a potential voluntary suspension.

Why has Core Lithium entered voluntary suspension?

According to today’s media release, the voluntary suspension is designed to provide Core Lithium’s management with more time to complete the share placement.

Earlier this week, Core Lithium requested a trading halt for its securities, pending further details on a share placement. Despite slating 3 February as the announcement date, the company has not provided investors with further details.

An article published in The Australian Financial Review earlier this week speculated on Core Lithium’s potential equity raising.

Stockbrokers Taylor Collison and Bell Potter have reportedly managed to raise as much as $30 million from investors. The article noted that Core Lithium was looking to undertake placement at 25 cents per shares. New shares expected to be accompanied by one-for-two option.

Core Lithium has not provided a full explanation for the share placement. The funds raised are, however, expected to advance the company’s Finiss Lithium Project in the Northern Territory.

More information of the Core Lithium share price

Core Lithium is an emerging Australian lithium developer. The company’s share price has soared more than 290% since the end of December 2020. Core Lithium owns 100% of it’s flagship Finniss Lithium Project.

In recent market update, Core Lithium noted that the project was almost construction ready. The company also noted that start-up capital expenditure is expected to be around $85 million. This could translate to $160 million annual revenue.

At the time of writing shares in Core Lithium remain in voluntary suspension, having last traded at 34.5 cents per share.

More reading

• Why the Core Lithium (ASX:CXO) share price is in a trading halt
• Here’s why the Core Lithium (ASX:CXO) share price stormed 19% higher today
• Afterpay and Creso Pharma were among the most traded shares on the ASX last week
• Here’s why the Core Lithium (ASX:CXO) share price rocketed 45% higher today

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In afternoon trade on Wednesday, the Virgin Money UK CDI (ASX: VUK) share price is the best performer on the S&P/ASX 200 Index (ASX: XJO) by some distance.

At the time of writing, the UK-based bank’s shares are up a massive 13% to $2.79.

Why is the Virgin Money UK share price surging higher?

Investors have been buying the bank’s shares after the release of its first quarter update.

According to the release, Virgin Money UK experienced strong levels of customer deposit inflows again during the quarter. It recorded customer deposit growth of 0.9% for the period.

Management advised that this reflects lower consumer spending from tighter COVID-related restrictions, and increased levels of business liquidity driving growth in relationship deposits.

And while there were early signs of some recovery in customer spending before tighter COVID-restrictions were imposed, management notes that the combination of the most recent restrictions and customer caution resulted in continued inflows.

The increase in deposits led to its loan-to-deposit ratio falling to 106% from 107% at the end of FY 2020.

Finally, the sum of the above led to the bank reporting a stable net interest margin (NIM) of 152 basis points for the quarter.

Loan book declines

Virgin Money UK’s total loan book declined by 0.3% to 72.2 billion pounds during the quarter.

This was driven by its focus on margin management, prudent underwriting, and supporting customers in a continued uncertain environment. A small reduction in mortgages and unsecured balances was partially offset by growth in business lending.

COVID support

The bank has continued to support customers through the pandemic with payment holidays where appropriate.

Pleasingly, the stock of active payment holidays continued to decline across all portfolios during the quarter.

However, as was expected, the proportion of customers requiring further support upon exiting their payment holiday has increased modestly. Though, it remains within the level assumed in its provision.

Management commentary

Virgin Money UK’s Chief Executive Officer, David Duffy, was pleased with the quarter.

He said: “Virgin Money had a profitable and positive first quarter and continued to prioritise our customers and colleagues through this uncertain external environment including through payment holidays and Government lending schemes.”

“We have made a good start to the year with the launch of new customer propositions, further roll-out of our rebrand programme and a return to statutory profit, while maintaining a disciplined approach.”

Outlook

Looking ahead, Mr Duffy appears cautiously optimistic.

He commented: “The Group remains strongly capitalised and we have good momentum as we look out into the remainder of the year. Given the current UK-wide restrictions and ongoing uncertainty, we maintain the cautious economic outlook we outlined in November and our full year guidance remains broadly unchanged.”

“Looking ahead, the vaccine roll-out and EU trade deal are encouraging for the UK’s economic recovery and we remain focused on disrupting the market through a variety of innovative new products and propositions with a customer and brand experience that is the best in the market,” he concluded.

More reading

• ASX 200 up 1.1%: Amcor jumps, South32 sinks, Virgin Money UK rockets

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Value shares have been relatively unpopular for much of the last year. Investors have instead focused on companies that could deliver high earnings growth in what is expected to be a changed global economy post-coronavirus.

As such, there may be buying opportunities among cheap shares in high-quality businesses. Through purchasing a wide range of them now and holding them for the long run, it may be possible to obtain index-beating returns that increase an investor’s chances of making a million.

Buying high-quality stocks at cheap prices

There is a great difference between cheap shares and value shares. The former are simply companies that trade at very low prices. In some cases, they can offer good value for money if, for example, they are a high-quality business with a solid financial position and large competitive advantage. However, in other cases they may be trading at a cheap price because they lack those attributes, or because they face difficult operating conditions in the long run.

Therefore, it is important to assess the quality of a business before buying it. Clearly, this will be very subjective. But it is likely to include consideration of a company’s balance sheet, strategy and market position relative to competitors to deduce whether a company offers good value for money at its current price. All of these factors can have a large influence on its capacity to deliver improving profitability. As such, ensuring they are in place before purchase could be a means of reducing overall risks and improving potential rewards.

Building a portfolio of value shares

Many value shares are priced at attractive price levels because they face temporary challenges. For example, at the present time they may face disruption from coronavirus lockdown restrictions that are unlikely to last in perpetuity.

However, those threats can sometimes cause the downfall of a business. For example, they may be unable to adapt to a changing world economy in the long run, or new technology may make their products obsolete. This means there is a real threat that any value stock can lose money for investors, or even fold. This makes it extremely important to build a diverse portfolio of stocks that, together, can provide a high overall return. Otherwise, it is possible to have a portfolio that is overly concentrated and susceptible to poor returns from a small number of holdings.

Making a million

An investor who buys a diverse portfolio of shares to match the return of the wider stock market could realistically make a million in the long run. For example, investing $750 per month at an 8% annual return would produce a portfolio valued at over $1m within 30 years.

However, through buying value shares it is possible to outperform the stock market. This could help to bring a £1m portfolio in a shorter timeframe as the world economy and stock market recover.

More reading

• Shares in Core Lithium (ASX:CXO) enter voluntary suspension
• Why the Virgin Money UK (ASX:VUK) share price is surging 13% higher
• 3 reasons Microsoft is a great growth stock
• Why BHP, Estia Health, HUB24, & South32 shares are dropping lower
• 3 highest yielding ASX dividend shares

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Making money in stocks doesn’t have to be difficult. It’s a lot easier to do when a household name like Microsoft Corporation (NASDAQ: MSFT) is still cranking out stellar operating results every quarter. The Redmond, Washington, company turned in another doozy of a quarter last week, with revenue up 17% and earnings per share surging 34% year over year. 

Likewise, the stock is up 43% over the last year, after more than quadrupling over the last five years. Here are three reasons why this growth stock should continue delivering market-beating gains far into the future.

1. Office and Xbox continue to grow

The productivity and business processes segment posted solid results over the last two years, with revenue growing 13% and 15% in fiscal 2020 and fiscal 2019, respectively. The transition of Office to a subscription service has worked wonders for Microsoft’s core software business. In the fiscal second quarter, segment revenue growth remained consistent, growing 13%, or 11% excluding currency changes.

Microsoft now has 47.5 million consumer subscribers to Microsoft 365, up 28% year over year, where the company bundles Word, Excel, and other productivity software into a single subscription plan. 

Gaming is another consumer business that is firing on all cylinders right now. Xbox content and services revenue grew an astonishing 40% year over year. Even more impressive was Xbox hardware, where the November launch of the Xbox Series X and Series S was the most successful in company history, sending game hardware revenue up 86% year over year. 

Gaming makes up less than 10% of Microsoft’s total revenue, but the next five years look very bright for the Xbox business. The Xbox Game Pass subscription service now has 18 million subscribers, but it’s growing rapidly, with 3 million new members added in the last quarter alone.  

Management sees significant growth opportunities for gaming and consumer software services, as the shift to a subscription model in both businesses continues.

2. Cloud services

The most important reason to invest in Microsoft is growth in the cloud. Microsoft Azure experienced a small acceleration in growth last quarter, with revenue increasing by 48%, excluding currency. One analyst expects Azure to exceed both Office and Windows in annual revenue by next year. 

Demand for cloud infrastructure services is in more demand than ever, as organisations look for more digital solutions in a post-COVID-19 world. Azure is one of only a few cloud service providers that have the global scale to serve large corporate customers, which puts Microsoft in a solid competitive position against other cloud service providers.  

Microsoft continues to expand its cloud footprint globally, recently announcing seven new data centres in Asia, Europe, and Latin America. Microsoft spent $5.4 billion in capital expenditures in the last quarter to support growing global demand and customer usage of cloud services. That level of investment signals more growth ahead.

3. Free cash flow and dividends

Microsoft’s lucrative software business has churned out high profit margins and free cash flow for many years. Free cash flow improved by 17% in the last quarter, bringing the total to $50 billion over the last four quarters. That level of cash generation makes Microsoft a great dividend stock, too.

Over the last 10 years, the quarterly dividend has risen from $0.13 per share to $0.56. That brings the annual payout to $2.24 per share, providing investors a dividend yield of 0.94% at the time of writing. 

The software giant is winning big across consumer software, cloud services, and gaming. It’s established, dominant, and extremely profitable. That’s why Microsoft is the perfect tech stock for any investor’s portfolio.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Ballard owns shares of Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P/ASX 200 Index (ASX: XJO) is on course to record another solid gain on Wednesday. In afternoon trade, the benchmark index is up a sizeable 1.1% to 6,838.1 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

BHP Group Ltd (ASX: BHP)

The BHP share price is down over 2% to $44.11. This appears to have been driven by a broker note out of Credit Suisse this morning. According to the note, the broker has downgraded the mining giant’s shares to a neutral rating but lifted the price target on them to $42.00. Although it has increased its earnings forecasts to reflect higher iron ore prices, it still feels BHP’s shares are fully valued at the current level. Hence today’s downgrade.

Estia Health Ltd (ASX: EHE)

The Estia Health share price is down 2% to $1.86. This is despite there being no news out of the aged care operator. However, it is worth noting that in December Morgan Stanley downgraded its shares to an underweight rating with a $1.50 price target. It believes the near term could be challenging for the company.

HUB24 Ltd (ASX: HUB)

The HUB24 share price has fallen 1.5% to $24.52. This may have been driven by profit taking after a strong gain in 2021. Prior to today, since the start of the year, the investment platform provider’s shares had rallied a sizeable 15%. The catalyst for this was the recent release of an impressive second quarter update in mid January.

South32 Ltd (ASX: S32)

The South32 share price has tumbled 4.5% lower to $2.66. Investors have been selling the mining company’s shares after the price of silver crashed back down to earth overnight. The silver price gave back recent gains after the Reddit short squeeze began to unwind.

More reading

• ASX 200 up 1.1%: Amcor jumps, South32 sinks, Virgin Money UK rockets
• ASX coal stocks increasingly isolated with rise of start-ups like MGA Thermal
• Why ASX silver shares like Silver Mines (ASX:SVL) are falling today
• These 2 ASX stocks jumped after a broker upgrade to “buy” today
• Why these ASX silver shares are surging today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX dividend shares on the stock exchange that have very high dividend yields.

Here are three examples:

Fortescue Metals Group Limited (ASX: FMG)

Fortescue has a trailing grossed-up dividend yield of 11.1%.

It has grown to become one of the largest miners on the ASX, with a market capitalisation of around $70 billion according to the ASX.

In an ASX announcement the company recently said that it generated net profit after tax (NPAT) of more than US$940 million for the month of December 2020. It also said that preliminary, unaudited NPAT for the six months ending 31 December 2020 will be in the range of US$4 billion to US$4.1 billion.

In the ASX dividend share’s quarterly production update for the three months to 31 December 2020, it said that it saw iron ore shipments of 46.4 million tonnes (mt) in the quarter which contributed to record shipments for the half year of 90.7 mt.

Revenue per tonne increased by 15% compared to the first quarter of FY21.

Net debt reduced to US$0.1 billion. Fortescue said its balance sheet was focused on low cost, investment grade terms while maintaining flexibility to support ongoing operations and the capacity to fund future growth.

Pacific Current Group Limited (ASX: PAC)

Pacific has a grossed-up dividend yield of 8%.

This business is about finding quality investment managers around the world and taking a minority investment stake in them, then helping them grow with its expertise.

It has investments in a number of different managers including GQG, ROC and Victory Park.

Pacific says that it has a pipeline of new investment opportunities, with additional investments expected in the second half of FY21.

In FY20 the ASX dividend share saw funds under management (FUM) increase 62% to $93 billion, which helped underlying earnings per share (EPS) grow by 18% to $0.51. The Pacific Current board decided to increase the FY20 dividend by 40% to $0.35 per share.

In the period ending 31 December 2020, Pacific Current said that funds under management (FUM) controlled by the boutique asset managers within Pacific Current increased to $112.8 billion, an increase of 8.3% from 30 September 2020.

In that quarterly update, Pacific Current said that GQG’s assets once again posted significant increases, ending a 12-month period that saw FUM grow by more than US$35 billion.

The ASX dividend share is considering launching a new fund to invest the company because it has the ability to deploy far more capital than it can access. Pacific Current would receive management fee revenues from the fund as well as co-investment rights.  

Charter Hall Long WALE REIT (ASX: CLW)

Charter Hall Long WALE REIT has a FY21 distribution yield of 6.2%, assuming a 100% distribution payout ratio as per management comments and last year’s payout ratio.

This real estate investment trust (REIT) owns a diversified portfolio of properties across Australia. It’s exposed to the following different tenant industries: telecommunications, government, grocery and distribution, convenience retail (service stations), pubs and bottle shops, food manufacturing, waste and recycling management and ‘other’ such as Bunnings Warehouse properties.

It has one of the longest weighted average lease expiry (WALE) profiles in the industry, with a WALE of 14.2 year.

Some of its biggest tenants include Telstra Corporation Ltd (ASX: TLS), government entities, BP, Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL) and Metcash Limited (ASX: MTS).

The ASX dividend share is expecting to make operating earnings per share (EPS) of at least 29.1 cents in FY21.

More reading

• Got cash to invest? Here are 3 ASX shares to buy
• Why investors should look beyond the Reddit army to these ASX fundamentals
• BHP Energy and Zip were among the most traded ASX shares last week
• Here’s why the Fortescue Metals (ASX:FMG) share price fell 12% in January
• Why this fund likes these 3 ASX shares

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This GameStop thing?

Frankly, I’ve lost track of what stage of grief I’m up to.

No, I’m not crying for the short-sellers who made their beds (and their bets) and now have to lie in them.

No, I’m not crying for the reddit crowd who like some self-styled (cough) Robin Hoods (cough), were trying to stick it to The Man, while simultaneously making The (same) Man, in a different guise, rich – and who lost 60% of their investment overnight.

No, I’m not crying for the brokers who are having to raise billions of dollars just to make sure they stay solvent as this palava plays out.

No, I’m not crying for the regulators, who somehow – even in the shadow of the GFC – had no problem (or just no solution) for 140% of a company’s shares apparently being sold short.

The grief I’m feeling is rooted in the fact that this whole shemozzle was so bloody avoidable.

The grief I’m feeling is that ‘investing’ is being caught up in this modern day speculative mania.

The grief I’m feeling is that the stock market – one of the world’s best inventions, which has powered innovation for centuries – is being used as a casino.

The grief I’m feeling is that any normal person could have told you the whole thing was – is – nuts.

Here’s the thing: I know of no other profession, pursuit or preoccupation so determined to ignore the lessons of history.

We have case study after case study of dumb risks being taken.

Speculation going badly.

Money being lost.

There are books and books of quotes, warnings and examples.

You don’t even need to be that old, to have heard or seen the stories – first hand – about what could go wrong.

“The markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes

“Only when the tide goes out do you discover who’s been swimming naked.” – Warren Buffett

“I can calculate the movement of stars, but not the madness of men.” – Sir Isaac Newton

“If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.” – Warren Buffett

I could go on.

And the examples:

The GFC, when counterparty risk was exposed for the enormous threat it is.

The Poseidon boom.

Long Term Capital Management, the hedge fund that was home to literally a dozen Nobel Prize winners… and still went broke when the computer models themselves broke.

The dot.com boom, when business models were old hat, and billions were being punted on little more than ‘eyeballs on a website’.

Every. Speculative. Mania. Ever.

Seriously, if this was any other industry, and the participants failed so spectacularly to include the lessons of history in their work, they’d be out of a job before you reach the end of this article.

Can you imagine a doctor, in 2021, grabbing leeches and a garden saw on the way into the operating theatre?

Can you imagine a scientist starting with “Well, we know the Sun rotates around the Earth…”

Can you imagine a builder reinventing the recipe for bricks, and mortar, from scratch?

And yet, we have an industry – my industry – that seems to believe that history re-starts about once a decade and that anything before that isn’t worth considering.

Is it ego? Probably. There’s no shortage of it in finance.

Is it greed? Almost certainly. After all, the rewards for taking risks with other people’s money are immense, and the risks (to you!) pale into insignificance next to the size of your potential bonus.

Stupidity? This time, no. People in finance are far from stupid. Often the smartest guys in the room. But did I mention Long Term Capital Management? IQ, unfortunately, is far from enough in this game.

Is it inexperience? Probably. Combined with the other three, above, it’s far easier to imagine you’re a genius and come up with a new ‘can’t lose’ system than to spend time learning from history. 

Is it hubris? Now we’re on to something…

Actually, I think I’ve worked it out.

The finance industry is essentially analogous to a group of Year 9 boys.

See, my wife is a consultant and teacher. And she tells the story of every new group of Year 9 boys, who suddenly come up with the greatest set of excuses and behaviours, sure to get one over on the teacher.

Except, in their haste, they don’t seem to be able to conceive that last year’s Year 9 did exactly the same thing, also ignorant of the group before them.

And the group before that.

Just because it’s new to them, their developing brains just don’t seem to realise that other people have seen it all before.

If only they’d thought to ask.

God only knows how long this GameStop thing has to go.

But here’s what I know:

First, Wall Street, far from being ‘beaten’, will find a new way to win this sort of game.

Second, the losers are likely to be the poor schmucks who either don’t see the bigger picture, are blinded by the ‘story’ of beating Wall Street, or whose money is being managed by the few Wall Street losers who end up being the exception that proves the rule.

Third, this could have all been avoided if people stopped using the stock market as a casino.

And fourth… this will all happen again, around a decade from now.

So, I want to leave you with a way out.

It’s very simple:

Don’t try to beat Wall Street at it’s own game.

Beat Wall Street by playing a different game!

This whole thing hasn’t impacted my portfolio, at all. It hasn’t impacted the companies I’ve recommended at Motley Fool Share Advisor nor any other Motley Fool services.

It only cost you money, if you decided to play the GameStop game. If you wanted to take extra risk. If you thought you could outsmart and outtrade the next guy. If you didn’t learn the lessons of history.

I’m frustrated, on behalf of the many thousands who got sucked into this game.

Some of them will have been dragged away from sensible investing, for the promise of a quick buck. Others will have bought GameStop as their first foray into ‘investing’ – and some of them will likely never invest again after being burnt.

(And I’m frankly annoyed as hell at public figures who should have known better, but were actively egging on the crowd. It was irresponsible and reckless.)

But it hasn’t cost me a zac. Nor has it changed how I invest, or what I invest in.

So I worry for others. I hope it hasn’t put them off investing, or given them the wrong impression.

I hope it hasn’t taught them the wrong lessons, or made them more likely to do silly things, in future.

I hope they can remember that it’s the tortoise who wins, not the hare.

And that, in investing, fortune doesn’t favour the (crazy) brave.

It overwhelmingly favours the patient. 

At The Motley Fool, that’s how we invest.

Fool on!

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The post GameStop… or GameStonk? And what does it mean for you? appeared first on The Motley Fool Australia.

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