Single Tweet Sends Apple Shares Soaring

http://www.wired.com/business/2013/08/single-tweet-sends-apple-shares-soaring/

by esalazar • 13 years ago

38 56 13 years ago

sologoub2• 13 years ago

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

autotravis• 13 years ago

Right. Swooning over a vacuous tweet by some investor. Almost like an instant pyramid scheme. And what's with uppercase "APPLE"? Did he mean AAPL?

cinquemb• 13 years ago

And all the money flying around today (its POMO Tuesday[0]) couldn't hurt either…

[0] http://www.newyorkfed.org/markets/pomo/display/index.cfm

slapshot• 13 years ago

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.

sologoub2• 13 years ago

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.

icebraining• 13 years ago

Or the machines behind the markets.

sbashyal• 13 years ago

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.

xwowsersx• 13 years ago

Important point. Nicely said.

martindale• 13 years ago

Yes, but now argue it in court.

EvanKelly• 13 years ago

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• 13 years ago

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

http://www.theatlantic.com/technology/archive/2011/03/does-a...

aaronbrethorst• 13 years ago

Trees falling in the forest, etc. etc.

markbao• 13 years ago

I think it's a combination of both. Icahn's investment in Apple was the reason that people found reason to invest, but that information was brought to people through the distribution channel of Twitter.

So Twitter is an accomplice in this situation, since it acts as how that information got disseminated to an audience, which I think still counts for a lot since it could have been an important signal, but it without Twitter, not as many people might have not known about it.

Not only that, but the fast dissemination of this information (due to the nature of Twitter) might have made the stock go up faster than a news article coming out a day later, being read at different times of the day.

cremnob6• 13 years ago

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• 13 years ago

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

hkmurakami• 13 years ago

both approaches are totally fine. just depends on your objectives and volatility tolerances.

cremnob6• 13 years ago

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.”

rdl• 13 years ago

I bought a bunch of out of the money calls (500-600) for jan 14 and jan 15 when Apple was 450, and a bunch more at 400. It has been...exciting.

aprescott3• 13 years ago

I'm not an investor but I've read both of Graham's main books. I don't think value investing in the Graham sense would lead you to a company as big as Apple, and certainly not with the company's stock as 75% of a portfolio!

cremnob6• 13 years ago

You alluded to it; my investing philosophy, while highly influenced by Graham, isn't the same as his.

pachydermic• 13 years ago

Dude why the hell would you do that?

If you have a family and stuff to look out for, you should definitely diversify your portfolio. It can't possibly be worth the risk!

But if you're young and have no family... best of luck, man. But I am an Apple doubter and would invest like that no matter what company you're talking about.

unabridged• 13 years ago

Can I ask why you believe AAPL is undervalued? I think the exact opposite, at its current market cap you could buy both Google and Amazon. The iphone popularity has already crested and is steadily losing ground to android, itunes is losing ground to other digital stores and streaming media.

echohack• 13 years ago

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...

I wonder how well tulip bulbs are doing these days.

cremnob6• 13 years ago

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.

czr802• 13 years ago

I don't think the (strong) version of the efficient-market hypothesis is defensible but Warren Buffet's track record is not proof that it is wrong - in a random market, given a large number of investors, some will do well purely by chance.

btilly5• 13 years ago

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.

finnh3• 13 years ago

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• 13 years ago

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

finnh3• 13 years ago

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.

mik3y• 13 years ago

What I find interesting is Icahn filed a press release yesterday, basically telegraphing his intention to post juicy bits like this to Twitter:

  NEW YORK, Aug. 12, 2013 (GLOBE NEWSWIRE) [..]
  
  Our Chairman, Carl C. Icahn, intends to
  use Twitter from time to time to communicate
  with the public about our company and other
  issues.
  
  [..]
 
  It is possible that the information that Mr.
  Icahn posts on Twitter [..] could be deemed
  to be material information.

Source: http://www.ielp.com/releasedetail.cfm?ReleaseID=784592

fivethree• 13 years ago

You're suggesting that Icahn is trying to pump and dump one of the largest companies on the planet? Investment isn't one of your better skills is it?

finnh3• 13 years ago

Wow, hostile! See my response to this same question when it was more gently expressed by 'hamburglar.

wikiburner• 13 years ago

Anyone interested in the backstory of this sort of thing might find this brief article on Icahn's "$2,000 Tweet" interesting.

http://www.buzzfeed.com/mariahsummers/if-you-want-to-be-a-tw...

melvinmt• 13 years ago

"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?

cremnob6• 13 years ago

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

bapbap2• 13 years ago

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.

clarky075• 13 years ago

Yeah it was pretty much immediate. The volume surge was huge.

grannyg00se2• 13 years ago

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.

bapbap2• 13 years ago

Thanks for this, I find that amazing

rch• 13 years ago

Wouldn't the trading algorithms be tuned to amplify a price move for AAPL in particular? What if the subject had been Caterpillar?

Single Tweet Sends Apple Shares Soaring

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