ShmoopTube

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Finance a la shmoop. What are overbought and oversold? Alright well the company

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hair be back came out with a hair growth formula for men that actually worked on [Before and after shot of a bald head and then a head full of hair]

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the head not the knuckles not the elbows not the feet not on the well you know..

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anywhere else.. But actually on the head and it didn't look like transplanted

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butt hair and of course the stock zoomed from ten bucks at its IPO to almost a [Stock prices from IPO to now]

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thousand the only problem was, well the company was kind of running out of

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bald heads to service. It was clear that growth would slow at some point in the [Pie chart showing bald men and men with hair]

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next few years and maybe slow dramatically yet everyone loved hair be

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back and while at the IPO the company went public at twenty times earnings it

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now traded at eighty two times earnings and that multiple kept expanding well if [Price of earning keeps going up]

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you looked for shares of hbb you'd find them in essentially every neutral fund

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hedge fund index fund family office portfolio University endowment and

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pension fund and well pretty much you name it everywhere everyone owned it. [Arrows pointing to everyone owning shares]

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Only so many bald heads to shade though well these shares are overbought that is [Overbought stamp]

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there was a much higher chance that from that point while they'd go down rather

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than up alright does that mean they go down next quarter next year no not [Red cross appears on the calendar]

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necessarily it's just that the supply-demand

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equation here looks a bit scary especially if you were a trader playing

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hot potato with a potentially highly volatile eighty two times earning stock [Trader on the phone]

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that could get cut in half really quick and of course the same holds true for

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the company bald no more whose Somalian division did in fact engage in fraud

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they were convicted they had the evidence on video and had to pay a fine [Court gavel]

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of 600 million Zimbabwean dollars or roughly 11 bucks U.S. but when news of

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the fraud conviction hit shares of the primary US corporation went from about [Stock chart going down]

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$200 a share all the way down to 40 where they sit today representing a

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company with no debt fifteen dollars a share in cash and two dollars a share in [Company information is listed]

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projected earnings this year assuming nothing

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from Somalia well those numbers place the equity cap of the company at a

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modest single-digit multiple of earnings about half the multiple at which this

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growthy company had historically traded well the shares now are owned

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almost nowhere just a fuel loyal concentrated value oriented mutual funds [A few mutual funds are shown on a map of the world]

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own it and by the way they're all predicting three or four dollars a share

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in earnings not two that's how we got that single-digit multiple there uh

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nerd lingers. No hedge funds on it no endowments no pensions well the shares [Funds being crossed off a list]

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have been yes oversold and likely they have upward pressure at least as driven [Oversold stamp]

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by sentiment changes likely to hit when um you know that Somalian thing has long [Chart showing prices going up]

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since passed and eeesh talk about something that'll put a little hair on your chest.. [Guy with a really hairy chest]

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well, you don't necessarily want it there but you know...

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