It is fair to say the last 12 months has been a roller coaster ride, and nowhere more so than in investing.
After the initial drop in value when coronavirus took Britain and the rest of the world in its grip, the markets then rallied, often performing in a way that was counter to the stark economic realities facing the globe.
There were winners and losers, of course. Technology companies and those who could sell their wares on the internet fared well, but high street retailers and those linked to holidays and travel did not.
But there were some surprising – albeit short lived – winners during last year, including companies that saw a meteoric rise in their popularity and share price. What is most surprising though are the reasons behind them.
Clever marketing? Not always. Being in the right industry at the right time? Not so much.
Some of the most spectacular investments made during the pandemic were the result of misidentification, a tweet from a billionaire, or investor belief that an ailing company would bounce back.
However, at the time of writing, investors’ initial excitement would have turned to dread when the prices plummeted or the “bounce back” failed to materialise.
So, without any further ado, here are three of the last year’s most bizarre investments and the reasoning behind them.
The wrong Zoom
As workers of the world left the office and were told to stay at home, video call app Zoom became a household name as millions relied on it to stay in touch with colleagues and loved ones.
Understandably, investors were keen to buy shares in this much used app. However, media reports started to emerge that many were mistakenly buying a company called Zoom Technologies. A key reason for the misidentification was the company’s identification code for traders, which is also known as its “ticker”.
Many investors were ploughing their hard-earned money into Zoom Technologies, a small Chinese company that makes mobile phone parts and has nothing to do with video calls. As a result of the misunderstanding, Zoom Technologies saw its share price shoot up 1,800%.
According to the Financial Times, the United States Securities and Exchange Commission eventually stepped in and suspended shares in Zoom Technologies after a tenfold increase in share value since the beginning of 2020.
The billionaire sent the wrong Signal
Another case of mistaken identity happened with messenger app Signal early in 2021.
The company has become an increasingly popular rival to WhatsApp, and earlier this year Elon Musk tweeted “use Signal”, creating a rush of investors scrambling to buy shares in the company. It wasn’t the only time the entrepreneur billionaire and social media influencer moved the markets: he also sent Etsy’s share price soaring 10% after a tweet.
However, investors again sunk their money into the wrong company following his tweet about Signal thanks to another mistaken “ticker” code.
Instead shares were purchased in Signal Advance Inc, a tiny medical device company based in Texas, sending its share value up a stellar 5,100% in three days of trading.
But that wasn’t the strangest part of the story. As articles were emerging about the mistake, investors kept buying into the wrong Signal, meaning its price continued to rise, leaving some in the industry to speculate that investors knew it wasn’t the messenger app, but didn’t care.
Buying shares in bankrupt companies
As the world entered lockdown a year ago and international travel was banned, one company was hit particularly hard.
Like the airlines, car-hire giant Hertz struggled as the need for rental cars became non-existent, especially at its airport offices. Without demand, Hertz filed for bankruptcy at the end of May, and by June the company’s stock had gone into freefall.
This, however, did not put some traders off, with the likes of mobile trading app Robinhood seeing Hertz’s troubles as an opportunity to buy shares at a bargain price. Believing that the company would bounce back once the world returned to normal, investors started to buy into the company, causing its share price to rocket.
But in an unprecedented move, the frantic buying of its shares prompted Hertz to try and sell $1 billion of stock – while still facing bankruptcy – to boost its coffers. However, the United States Securities and Exchange Commission stepped in and quashed the idea.
As the virus kept its grip on the world and international travel bans stayed in place, hopes for the ailing rental company began to slip away.
Investing on your own is hazardous – use a professional
As the above stories highlight, the ability to get things wrong and potentially lose a lot of money can be much greater if you are investing by yourself.
Getting professional advice has two major advantages:
- In terms of risk, the investment will be assessed to ensure it is proportional to your circumstances and matches the level of risk you are prepared to take.
- A financial professional will help you create a long-term strategy, meaning you should not need to “panic sell” if your investments experience a short-term drop in value. Panic selling locks in your loss, whereas with a long-term strategy and professional adviser you can talk to, you can better understand the ebb and flow of the market.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, please do not act based on anything you might read in this article without speaking to a financial adviser first.