Let me ask you a question…
What’s the most valuable thing in the world?
No, it’s not gold or diamonds.
It’s not cryptocurrencies or shares.
It’s not even Australian property (though it must be close by now!)…
No, the most valuable thing in the world isn’t even a thing.
It’s ‘attention’. Or more accurately, control of attention.
Attention is the reason Google (now called Alphabet) is worth so much. They control people’s attention according to top secret algorithms.
Or for political ends, depending on who you believe.
Either way, they make billions of dollars as a reward for this power.
And attention is also the reason why celebrities like Kim Kardashian are worth so much. She’s a true expert in the art of self-promotion.
She’s famous for, well, being famous!
It’s a kind of narcissistic feedback loop that we’re all enthralled by.
To be honest, for a long time I couldn’t work out why.
What has she done that’s so important? I thought.
There was the obligatory sex tape of course. Followed by a near constant stream of her wearing skimpy outfits on picture-sharing app Instagram.
Hardly Nobel Prize-winning pursuits.
But then one day I got it…
She hadn’t done anything per se.
She’d just realised that a few bum shots were irresistible viewing for a heck of a lot of people. And it would get her heaps of publicity.
After she had this control over the attention of the masses, she could name her price for other money-making endeavours.
Kardashian charges more than $250k for a single sponsored Instagram post!
She’s like Google in a way. But instead of an algorithm, she’s got an arse.
Yes, attention is the most valuable commodity in the world. If you can command it.
But if you’re a slave to other people’s attention-creating power, then that’s a different matter.
And in investing it can be a very dangerous thing.
Let me explain how…
Retrain your brain
OK, I just realised I’ve said the words ‘sex’ and ‘slave’ in short order.
So, before your mind wonders to all things Prince Andrew, let me get to today’s investing related point pretty quickly.
You see, I was watching a stock very carefully last week, waiting for a good entry price for subscribers of my small-cap trading service.
The stock in question was Total Brain Ltd [ASX:TTB]. It’s an $85 million small-cap company listed on the ASX.
In a nutshell, Total Brain have developed an app that is supposed to help you train your brain. There’s more to it, of course, but it’s unimportant for our story here…
Anyway, like I said, I was lining up the stock, waiting for the right price to pounce on.
But then all of a sudden, the stock shot up for no reason at all.
There was no company news to explain the move.
In fact, the company had recently raised new capital. A situation which normally results in short-term selling pressure. The allure of a quick buck on any price gains tempts some new investors out after capital raises.
But instead, this stock price was rising fast. Buyers were piling in and it was defying gravity.
This was highly unusual in my experience. And when unusual things happen in trading, you have to pay close attention.
Was there something about to be announced? I thought. A new big-name partnership perhaps?
Or was a fund loading up on stock?
Should I still put out the trade alert to my subscribers?
I needed to work out what was happening here fast.
But then a quick Google search revealed all…
You see, on 18 November, this story appeared in the widely read Australian Financial Review newspaper.
‘Total Brain CEO eyes pro sports, US veterans in mental health play’
The exclusive story from AFR reporter Carrie LaFrenz told how Total Brain were aiming to be the ‘Fitbit’ for the brain.
‘Not only is he looking to Australian sports, he is also in talks with Major League Baseball in the United States,’ gushed the AFR.
It all sounded very exciting.
And suitably excited buyers bid the share price up from 8.3 cents to finish at 11.5 cents that same day.
Now, I’ll let you look at Total Brain yourself to see if you think it’s worth $90 million right now. But for the record it was founded in the year 2000 and they had an operational cash outflow of $1.7 million in the most recent quarter.
Not that the share price of high growth tech companies can’t grow fast if they’re growing market share too (regardless of cash flow or profits). And that could be what’s happening with Total Brain.
But for my money, I’ll let this trade slide at the moment.
Not just sour grapes
OK, is this just sour grapes on a missed trade you might be thinking?
And perhaps Total Brain deserves its mainstream press accolades. Perhaps they’re ready to hit the big time.
Time will tell on this front.
But a lesson I’ve learned a long time ago in small-cap investing, is that when it’s in the paper, it’s not the time to invest.
And I’m sticking to it.
As JFK’s Dad famously quipped in 1929 before the Great Crash:
‘When even the shoe shine boys are giving you tips, you know it’s time to get out.’
Or if people are talking, you should be walking (that’s my one).
For my money, if a small stock is in the paper, or a stock is attracting big interest on a small-cap forum site, this should be a warning bell that maybe you’ll pay dearly for this attention if you invest now.
In short, beware the ‘Kardashian’s Bum’ trade…
Editor, Money Morning
PS: Download this free report to learn three of the hottest pot stocks on the ASX right now.