Fake It Till You Make It
By Thu, Feb 20, 2020
Hey Scoopers,
The Feds were rather optimistic about the U.S. economy, and the Chinese decided to cut their interest rate. That’s why things worked out for investors on Wednesday and the market finished in the green — more on that in the “Overall Market” section.
Beyond the overall market, one company managed to crush its quarterly earnings and gain more than 30% in one day. However, a successful biotech stock disappointed investors with the news of selling more shares — more on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, “Fake It Till You Make It” strategy went totally wrong at a startup company that wanted to copy the success of its bigger and more successful competitor — more on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: All three indices finished Wednesday in the green. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Finally, some crypto investors decided to take some of their gains off the table, and Bitcoin’s price landed the day in the mid $9,000 range.
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It’s All Good, For Now…
The Nasdaq closed Wednesday at a new record-high level. And, the other two indices followed suit. The excitement was at least partially due to a rather positive tone by the Feds. The Federal Reserve policymakers met on Wednesday, and the meeting notes show that they are rather certain the economy and the interest rate can stay stable during 2020, despite risks such as the effect of coronavirus on the U.S. economy and the world. At the same, China decided to reduce its interstate rate to stimulate its economy and minimize the impact of coronavirus on economic activities. Those two good news were enough to push the market back in the green zone.
Now, That’s A Good Earnings Report…
So, what happened?
Shares of Stamps.com (Ticker: STMP) were up more than 34% on Wednesday. Do you remember, when last year about this time, the company voluntarily terminated its contract with the United States Postal Service, and the stock crashed 50% not once, but twice?
Well, since then, the stock has had nowhere but going up. In the latest quarterly earnings report, while analysts were expecting less than $1 per share in earnings, the company reported more than $2 per share, and that was enough to bring back life to the stock.
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Volatility Is the Nature Of This Stock.
So, what happened?
Shares of Bluebird bio (Ticker: BLUE) were down more than 8% On Wednesday. The company is a clinical-stage biotechnology company that develops gene therapies for rare diseases. Bluebird bio just released its first commercial product in Europe, which is a major milestone for biotech companies. However, bigger than expected losses and an announcement about an undisclosed amount of shares to be sold in the market soon had investors worried. Volatility is just the nature of the beast when you invest in biotech companies.
Fake It Till You Make It?
So what happened?
When you think of Peloton (Ticker: PTON) what does come to your mind? Beautiful people on your screen who are motivating you to ride that stationary bike faster. Those beautiful people and those online classes are one of the main reasons Peloton has a strong customer retention rate. That was enough reason for a startup company called Flywheel to copy the virtual classes on its platform. It is now forced to shut down its copycat product and give its customers a chance to swap their bikes for a Peloton bike.
This is a classic example of Fake It Till You Make It mantra that has gone totally wrong. Fake It Till You Make It is a mantra in Silicon Valley. Startups pretend they have cracked the success code until they actually do, and sometimes the Fake It part ends up becoming just copy whatever your more successful competitors do.
Com’on’ Flywheel. Do better … try harder …
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
