Zomedica (NYSE:ZOM) stock is the perfect embodiment of the phrase, everyone is a genius in a bull market.
For many quarantined Gen X, Y, and Z people, the pandemic was their first introduction to the markets.
Now some of the older folks in this group may have been navigating 401(k) monies or dabbling here and there, but few were rabid investors before last year.
Although, I shouldn’t say “investors” since that connotes holding onto positions longer than the current mobile phone model.
The confluence of huge piles of cash dumped into the economy and new trading platforms like Robinhood, combined with subreddits and other social media channels for novice (or in their own view, “alternative” or “modern”) marketeers, hit just as the market was tiring from its last self-sustained bull run that was in anticipation of this current bull run.
The latter shares were lightly traded small caps that had little institutional backing, so momentum traders could not only ride these stocks’ ups and downs but could also move them with volume and social media messaging.
Last fall, one of my daughters’ 17-year-old boyfriend was giving me stock advice that he picked up on his Robinhood account.
But maybe this week might give these rookies a bit of pause.
A Closer Look at ZOM Stock
If interest rates rise and inflation returns, as is being foretold in commodity prices and grocery bills, it will be the first time in over a decade that inflation will be a real issue in the markets.
That means bonds will once again be attractive and debt-driven growth will not be cool.
True, ZOM stock is up more than 100% year to date but it’s been on a recent slide that very well may continue.
Yes, ZOM stock is in a very hot sector, especially during lockdown. Modernizing veterinarians’ offices with fast, accurate diagnostic equipment for cats and dogs (for now), is a great idea.
But sales actually mean something, not just sector stats. We have to assess the company beyond its conceptual veneer.
Right now ZOM’s immuno-assay testing equipment, TRUFORMA, only tests for a couple of conditions in dogs and cats.
Investing in this equipment means you have to hope ZOM stock grows so the company can sink more money into a variety of assays, because sales aren’t rolling in.
No Longer Purring Along
But the markets, especially momentum growth stocks with massive market caps and no PEs (since they don’t have positive or sometimes any, earnings, are getting hit hard. This is when the new money runs away, stubbornly rides these stocks down or learns a lesson and takes what’s left and puts it in real stocks.
Although I’m guessing nowadays there will be a good-sized group of them buying crypto. More’s the pity.
ZOM stock is on to something, and hopefully, the company can use its five minutes of fame to get some real investors to build out its platform. Because this wild ride is also happening with the company and that tough on planning and management.
It’s going to be a while before ZOM stock is getting the right kind of attention for the right reasons, and it’s unlikely this new tsunami of investors care to stick around long enough to see the company well and truly grow.
If everyone is a genius in a bull market, then it also follows that we all look like fools in a bear market.
It’s hard to tell if this is simply a brief selloff of the beginning of The Big One. I can tell you from experience: when The Big Ones hit, you never forget them because you never knew how bad it can get. I don’t wish that on any investor, especially today’s current batch of geniuses.
Disclosure: On the date of publication, GS Early has no position in the stock featured in this article. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
GS Early has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors and publishers during that time. He’s seen a few things and heard most of it before.