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Finance: What are Overbought and oversold? 1 Views


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What are overbought and oversold? Hit play to find out.

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00:00

Finance a la shmoop. What are overbought and oversold? Alright well the company

00:08

hair be back came out with a hair growth formula for men that actually worked on [Before and after shot of a bald head and then a head full of hair]

00:14

the head not the knuckles not the elbows not the feet not on the well you know..

00:19

anywhere else.. But actually on the head and it didn't look like transplanted

00:23

butt hair and of course the stock zoomed from ten bucks at its IPO to almost a [Stock prices from IPO to now]

00:29

thousand the only problem was, well the company was kind of running out of

00:33

bald heads to service. It was clear that growth would slow at some point in the [Pie chart showing bald men and men with hair]

00:38

next few years and maybe slow dramatically yet everyone loved hair be

00:43

back and while at the IPO the company went public at twenty times earnings it

00:48

now traded at eighty two times earnings and that multiple kept expanding well if [Price of earning keeps going up]

00:54

you looked for shares of hbb you'd find them in essentially every neutral fund

00:59

hedge fund index fund family office portfolio University endowment and

01:04

pension fund and well pretty much you name it everywhere everyone owned it. [Arrows pointing to everyone owning shares]

01:08

Only so many bald heads to shade though well these shares are overbought that is [Overbought stamp]

01:14

there was a much higher chance that from that point while they'd go down rather

01:19

than up alright does that mean they go down next quarter next year no not [Red cross appears on the calendar]

01:23

necessarily it's just that the supply-demand

01:25

equation here looks a bit scary especially if you were a trader playing

01:29

hot potato with a potentially highly volatile eighty two times earning stock [Trader on the phone]

01:33

that could get cut in half really quick and of course the same holds true for

01:37

the company bald no more whose Somalian division did in fact engage in fraud

01:43

they were convicted they had the evidence on video and had to pay a fine [Court gavel]

01:48

of 600 million Zimbabwean dollars or roughly 11 bucks U.S. but when news of

01:54

the fraud conviction hit shares of the primary US corporation went from about [Stock chart going down]

02:00

$200 a share all the way down to 40 where they sit today representing a

02:05

company with no debt fifteen dollars a share in cash and two dollars a share in [Company information is listed]

02:10

projected earnings this year assuming nothing

02:13

from Somalia well those numbers place the equity cap of the company at a

02:17

modest single-digit multiple of earnings about half the multiple at which this

02:22

growthy company had historically traded well the shares now are owned

02:25

almost nowhere just a fuel loyal concentrated value oriented mutual funds [A few mutual funds are shown on a map of the world]

02:31

own it and by the way they're all predicting three or four dollars a share

02:35

in earnings not two that's how we got that single-digit multiple there uh

02:38

nerd lingers. No hedge funds on it no endowments no pensions well the shares [Funds being crossed off a list]

02:42

have been yes oversold and likely they have upward pressure at least as driven [Oversold stamp]

02:47

by sentiment changes likely to hit when um you know that Somalian thing has long [Chart showing prices going up]

02:52

since passed and eeesh talk about something that'll put a little hair on your chest.. [Guy with a really hairy chest]

02:57

well, you don't necessarily want it there but you know...

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