NEW YORK ( TheStreet) -- Nearly every trading day, I see more and more examples of what makes the markets so fascinating. Thought by many to be quite efficient overall, we often see quite the opposite as it applies to individual names. For a value investor, that's what can create opportunity; inefficiency is a positive.
The sometimes incredible gyrations in stock prices are the result of what market efficiency theories can't adequately measure; human beings, with all of our biases, fears, and assumptions making decisions on what to buy and what to sell. We react to new "information" quickly; we tend to follow the herd. It's the " oscillation between greed and fear" as applied to individual stocks.
Thursday, we saw Apple (AAPL) fall more than 12%, primarily due to slightly diminished expectations. The company went from the darling of Wall Street to a pariah nearly overnight. This is not a high-flying tech-bubble-era name, with little revenue and no earnings, this company trades for less than 9 times trailing 2014 consensus estimates, and has net margins in the mid-20% range.
It's also "followed" by more than 40 analysts, so there should not be that many surprises in terms of new information. In September, shares breached the $700 mark, and this was a "must-own." Four months and a 35% drop later, and some believe that the company's best days are behind it.AAPL data by YCharts
Now Apple is a "mistake" made by investors, because they picked up some shares for $650 in November that are currently worth $450. Apple shares now trade at nearly the same level as one year ago; what happened in between was a circus of greed and fear. Was Apple really worth $700 just four months ago? Is it worth $450 now? Netflix (NFLX), on the other hand, has gone from rock star to pariah back to rock star. Shares jumped 42% Thursday alone, and are up more than 170% since October. The company was expected to report a loss for its latest quarter, but instead reported a modest profit, revenue slightly ahead of the consensus, and now, prospects are bright.
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