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RAX Hits an Air Pocket or Do Earnings Matter?

Thursday Feb 14 2013

At our last faculty meeting Prof Jim Hackard introduced a student who had participated in a stock analysis contest. The subject was RAX Rackspace. The conclusion was that RAX was worth $80, may be but not for long as we discover this week. This is an excellent example of just how fast social mood, the topic of socionomics, can change. 

RAX

Screen Shot 2013-02-14 at 9.24.00 AM
This past summer I bought some RAX arond $40 on the drop to that level. AS I recall I sold as it soared past 60. It looks like the 80 level was achieved for three days. Unless one was quite nimble, one did not exit at the time. The fact was that RAX had risen too high above its red 200 day MA. Notice that is right where it fell this week. RAX makes lots of money but the story is that it did not make as much as the market wanted. No matter, RAX was poised for a fall, it was just the mood. 

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One response to “RAX Hits an Air Pocket or Do Earnings Matter?”

  1. cary kingsley Avatar
    cary kingsley

    this is where the disconect comes in, take RAX: solid earnings, major capital, big assets, and what is everyone worried about? One set of below projected earnings and their stock nose dives. Well of course it did, and the reason has nothing to do with RAX, it has nothing to do business, it has nothing to do with capitalism, rather it has everything to do with addiction. Follow: people addicted to gambling are perhaps the strangest group of folks you are likely to meet, lucky rabbits feet (except for the rabbit), the same unwashed shirt, the same betting stahl and so forth. Now what happens if these people come up short on a bet? Well they make changes to their habits and patterns, some double down, some curse the placer of the bet, some change shirts, some change casinos. And that is what happens with earning don’t match expectations: If RAX doesn’t do X in earnings I am dumping their stock right now. Add into this large fund managers who ‘HAVE’ to meet their projected earnings or thier clients (along with their earnings) will disapear. So between the addicts and the fund managers any negative blip will cause an unneeded sell off. People have no idea what they are doing with stocks somewhere between 1980 and today the world has forgotten that little line when they sign up for stocks (all investments carry a risk of loss).

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