Yeah I mean I think there are some big inefficiencies in the market, in particular on micro caps and in particular on microcaps that are boring to think about. The stock in question is a $134M market cap furniture company. I don’t think large funds are looking at them very hard.
I also think the entire sector is beaten down, and rightfully so, but one pattern I have seen in the last 18 months (and that’s a small sample so we’ll see if it holds) is that in a lot of cases sectors get beaten down too evenly. So what happens is the companies with really strong tangible book value get beaten down just as much as the ones who are highly levered with weak balance sheets or ones with reasonable balance sheets and better growth or more resiliency in a recession.
The same concept applies to people buying and selling ETFs for sectors, which forces the ETF to buy/sell everything in the sector indiscriminately.
The overall bet against the sector can be good, but it can also create opportunities in small and micro caps.
Whether these theories hold over 3, 5, 10 years, we’ll see. But so far, it’s working out quite nicely.
I dunno, was META really worth $378 a share in Sept 2021, $187 a share in March of 2022, $91 a share in November of 2022, and $300 a share now? Did the fundamental value of the business actually change that wildly in two years?
META certainly doesn’t lack collective eyeballs, but those swings indicate to me that there was a market for finding them undervalued.
Large companies are probably never going to be my bread and butter, let me be clear. But if the market can miss that badly on META, it sure as hell can miss that badly on 10-20 small and micro caps out of the thousands of companies that are publicly traded.
(Hopefully none of that came off as rude or combative, I enjoy your posts and I enjoy debating this stuff.)