High-speed news in the world of business and investing has popped to the top this week. High-profile individuals in business and investing indulged in hyper-speed information transmission. The incidents are worth noting in terms of corporate managements and investment philosophy, and the big picture for those of us who are regular investors.
We investors should actively seek out information; obviously, there’s a heck of a lot of it out there. However, even though it’s more accessible than ever, it’s also streaming faster than ever. That may make it harder than ever to balance speed with thoughtful, long-term analysis.
This is no time for passive following and knee-jerk reactions. Now more than ever, let’s slow down, count to 10, and make informed and thoughtful investment decisions.
The alpha idealist
Elon Musk, the Iron Man-like genius who has founded or is involved in cool-factor companies like Tesla Motors Inc (NASDAQ:TSLA), SpaceX, and SolarCity Corp (NASDAQ:SCTY), made an announcement about something called “the Hyperloop” earlier this week. One could argue that Twitter became a Hyperloop feedback loop for a while, in fact.
For all that Musk’s idea of a high-speed tubular travel train is forward-looking and cool — a fast and environmentally sustainable mode of transportation, according to his vision — he’s actually already admitted that he can’t execute the idea. He’s thrown it out there for someone else to tackle. Many think it’s not even feasible.
Any investor who’s been paying attention knows Musk has plenty of groundbreaking ideas already on his plate. I’d say he has so many it would be difficult to avoid being spread too thin. Too many distractions can be bad for any corporate manager, regardless of how visionary. Granted, he did admit that he has his hands full, but from the very beginning Tesla Motors Inc (NASDAQ:TSLA) shareholders should have come to that conclusion pretty quickly.
As investors, it’s hard not to love companies with passionate, brilliant, visionary founders. However, the potential for ego to the point of hubris is dangerous, and maybe top guys shouldn’t get too involved in too many projects. Right now, Tesla Motors Inc (NASDAQ:TSLA) is a popular stock that has skyrocketed in price. For all that the future may be bright, Tesla shareholders should prefer that Musk focus on his other endeavors and try to avoid getting caught up in others. Distraction can be deadly.
Part of assessing companies is thinking hard about management quality, and brilliance isn’t always the whole formula for successful steering over the long haul. The Tweet-fest about the Hyperloop might have been a distraction for us all.
Stock-boosting Tweets? #disturbing
Legendary activist investor Carl Icahn has embraced social media at 77 years young, advising investors to watch his Twitter account several days ago. That’s great, except that disclosure of information has been traditionally relegated to certain venues where investors can easily look for it and expect it.
So far, Icahn has tweeted about his stakes and stances on companies like Apple Inc. (NASDAQ:AAPL) and Dell Inc. (NASDAQ:DELL), which we all know are obscure and underfollowed (#sarcasm). Following his advice to follow him on Twitter, Icahn Tweet-disclosed his stake in Apple, which he deems undervalued (many of us do). In the past, he’s also Tweeted 140-character sweet nothings about his wranglings regarding Dell’s future as a public company.
Social media is great, and maybe it’s OK for investors and businesses to post certain pieces of information and hope they go viral. However, if you’re an investing luminary — or a corporate CEO — who has the clout to move stocks, maybe it’s time to count to 10 and hold the Tweets until disclosing extremely important information through more traditional channels like press releases and Form 8-K filings.
In May, the Securities and Exchange Commission gave the OK for social media to be used to disseminate information under Regulation FD (under certain conditions). Speaking of Musk, he had previously used Twitter to reveal the company’s positive cash flow, and Netflix, Inc. (NASDAQ:NFLX)‘s Reed Hastings used Facebook Inc (NASDAQ:FB) to reveal material nonpublic information. Incidents like that made people wonder if this was truly OK.
Obviously, although the SEC has given a cautious go-ahead to such modes of disclosure, this activity can be problematic for investors seeking information. Speaking of being active, it means we have other places where we should probably be actively looking for information, since these are still pretty wild, uncultivated places.
Transparency is great, not to mention reaching out to common investors and the public more than the pros on Wall Street. On the other hand, social media can be incredibly random in audience and reach. For the good of us average investors, maybe these high-profile individuals should count to 10 and filter their significant breaking news and thoughts through traditional channels before shrinking them to 140 characters, hashtagging them and sending them into the wilds.
For now, though, investors need to be aware that information is currently speed-walking the line between being extremely easy to get but possibly difficult to find — unless you know where to look and when.
Follow, but slow down
I’m a big believer that shareholders should practice active awareness, not passive following. We should choose and track our investments, and do our best to assess information. However, it’s time to note that social media is fast becoming part of the race for information, whether it’s a great thing for us or not. Regardless, it will require adjustment.
Speed doesn’t excuse us from slower analysis. Is management too overstretched or distracted with lofty ideas, some of which may not directly match their companies’ futures? Is a stock having ups and downs because of the opinions of a few activists or even analysts? How should we manage the new stream of information that may increase from social media outlets?
Given all the hype (not to mention hyperlooping) surrounding some stocks these days, maybe the biggest lesson here is that part of being an active investor is not just keeping track of the information, but also counting to 10 and making slow assessments.
When things speed up, sometimes the best course of action is to slow down.