What’s in a Name?

Financial data screen in angle. Photograph from real screen. All values and names are imitation, not real.

Past performance is no guarantee of future results.  Trend signals are proprietary research of Fortunatus Investments, LLC, a Registered Investment Advisor with the Securities and Exchange Commission (SEC). Reference to registration does not imply any particular level of qualification or skill.  Prior to June 2014, Fortunatus Investments was a wholly owned subsidiary of Executive Wealth Management, LLC and they continue to share common ownership and control. Data source for returns is FactSet Research Systems Inc. This chart is not intended to provide investment advice and should not be considered as a recommendation.  One cannot invest directly in an index. Executive Wealth Management does not guarantee the accuracy of this data.

Quote of the Week

(Photo from the Korea Herald, originally sourced from Facebook group No Plastic Shopping)
A supposedly environmentally friendly package for the Green Tea Seed Serum moisturizer from the Korean cosmetics brand Innisfree caused a commotion on social media last week when some customers peeled away the eco-friendly fiber shell to reveal a plastic bottle underneath. Innisfree issued a statement in response to the complaints: “We overlooked the possibility that the naming [“Hello, I’m Paper Bottle”] could mislead people to think the whole packaging is made of paper. We apologize for failing to deliver information in a precise way.”

Market News

“Nomen est omen” is a very famous Latin proverb. It means that a name (nomen) is a powerful predictor of future behavior (omen). On the other hand, in Shakespeare’s Romeo and Juliet, Juliet muses, “What’s in a name? That which we call a rose by any other name would smell as sweet.” So while people throughout history may disagree on the power of names, recent episodes in the financial markets show that a company’s stock name, or ticker, can influence performance. 

Last week, the cryptocurrency exchange platform Coinbase went public on the Nasdaq exchange. The company’s Chief Financial Officer, Alesia Haas, mentioned that one of the main reasons Coinbase picked the Nasdaq over the New York Stock Exchange (NYSE) is that the Nasdaq offered them the ticker symbol COIN. “Ultimately they had the ticker COIN, and that was a really great ticker for us to get, ” Haas said in a Bloomberg interview.  So why is it so important to secure a good name?

Last year, when the coronavirus lockdowns began in earnest, video meetings came to the forefront of business interactions with Zoom Video Communications as a leader in the field. Many traders who wanted to buy equity in this new growing trend found the ticker ZOOM and purchased shares of the corresponding company. Unfortunately, ZOOM was the ticker of Zoom Technologies Inc., a miniscule, moribund Chinese mobile-phone-component company that hadn’t released public financial data since 2011.  ZM is the ticker for Zoom Video Communications.  With no actual corporate revenue, ZOOM stock was up 209.6% in February 2020 due to the ticker turmoil. The mix-up got so bad that the SEC halted trading of ZOOM on March 26, 2020, over concerns of investor confusion, eventually forcing Zoom Technologies to change its ticker to ZTNO in hopes of reduced mistaken purchases. The shares of ZTNO would fall -99% from their 2020 high by the end of the year.

This wasn’t the only major ticker confusion of 2020.  Many users of the Robinhood brokerage app typed in “COKE” when looking for shares of the large-cap, high-dividend Coca-Cola Company. Unfortunately, the company that owns the recipe to the iconic American soda has the ticker KO.  COKE is the ticker for a regional bottler of the soft drink named Coca-Cola Consolidated. The confusion over the tickers seemed to spread to Robinhood itself, as noted on the February 12, 2020 edition of Matt Levine’s Money Stuff, mobile ads from Robinhood promoting a diversified stock portfolio for hypothetical clients included the small-cap COKE when they most likely intended to include KO (see the screenshot below):

The famous Nobel physicist Richard Feynmann would often state that knowing the names of things doesn’t constitute real knowledge about the things you are studying. The examples above show that traders that only looked at the names of companies were led astray in 2020, and hopefully they reinforce the idea that any equity investment should involve some deeper examination of a company’s financial fundamentals.

Richard Feynman – Names Don’t Constitute Knowledge

Model Update

There were no trades in the Fortunatus models during the week ending on April 17th, 2021.  The major equity market sectors remain in a long-term favorable trend, and the Fortunatus Asset Allocation models are near their maximum allowable equity exposure with domestic stocks favored over international shares.

Executive Wealth Management (EWM) is a Registered Investment Advisor with the Securities and Exchange Commission. Reference to registration does not imply any particular level of qualification or skill. Investment Advisor Representatives of Executive Wealth Management, LLC offer Investment Advice and Financial Planning Services to customers located within the United States. Brokerage products and services offered through Private Client Services Member FINRA/SIPC. Private Client Services and Executive Wealth Management are unaffiliated entities.  EWM does not offer tax or legal advice. Please do not transmit orders or instructions regarding your accounts by email.  For your protection, EWM does not accept nor act on such instructions. Please speak directly with your representative if you need to give instructions related to your account. If there have been any changes to your personal or financial situation, please contact your Private Wealth Advisor. 

Returns are calculated as indicated below with reinvested dividends not considered except for the Barclays U.S. Aggregate Bond Index. Data source for returns is FactSet Research Systems Inc. The London Gold PM Fix Price is used to calculate returns for gold.

1 Week = closing price on April 16, 2021 to closing price on April 23, 2021

 1 Month = closing price on March 23, 2021 to closing price on April 23, 2021

 3 Month = closing price on January 22, 2021 to closing price on April 23, 2021

 YTD = closing price on December 31, 2020 to closing price on April 23, 2021

All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions as well as any prices indicated are current only as of the date of this report, and are subject to change without notice. Material provided is for information purposes only and should not be used or construed as an offer to sell, or solicitation of an offer to buy nor recommend any security. Any commentaries, articles of other opinions herein are intended to be general in nature and for current interest. Some of the material may be supplied by companies not affiliated with EWM and is not guaranteed for accuracy, timeliness, completeness or usefulness and EWM is not liable or responsible for any content advertising products or services.

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