NEW YORK (TheStreet) -- I'm not easily irritated, but nothing bugs me more than when investors put "hope" on the same level as quantitative assessments of a company, such as a cold, dissection of its income statement.
The stock market provides all sorts of hints about where it is headed, but investors often choose only those hints that point in the direction they want -- or "hope" -- the market to go.
Now I'm not going to pretend that I'm a psychologist, but as a former longtime shareholder in Sirius XM Radio (SIRI), I think I qualify to discuss what happens when "hope" in the stock market meets chronic disappointment. After all, how how many times has the company failed to meet expectations?
The company plans to report first-quarter earnings Tuesday. Some investors are clinging to the belief that the company will not only deliver a market-beating performance but will also raise subscriber guidance to make up for what was perceived to be a low-ball projection earlier in the year.Even if Sirius raises guidance and delivers a "good" quarter, the question is what will it mean for the stock. It will mean very little if anything at all.
$2.50 and Not a Penny MoreSirius' narrative is one that has reached urban legend status. Its tale has been told in "telephone-game" style to the extent that the story gets more and more exaggerated and distorted each time it is passed on to the next person. People say, "Here was a 5 cent stock a couple of years ago that has now grown more than 4,400% -- you should jump in on it." But the reality is, that fairy tale has reached an end. Disappointingly, many current investors wish to hang on to the hope that somehow another 4,400% is on the horizon, failing to realize that the stock would need to reach $100 to produce that kind of return. If the stock rose to $10 from current levels, that would represent a gain of 344%. Hitting $5 would require a gain of 126%, and reaching the more realistic $3 would represent an increase of 35%.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV