We Found The Market's 'Greater Fools' - Millennials

Following Peter Lynch's "invest in what you know" mantra, it appears Millennials jumped at the chance to own a piece of Snapchat - the social media platform that's all the rage among Millennials (and my teenage daughters).

 

Yesterday's rampage higher for the company that lost more money last year than its total revenues saw its market cap top $40 billion, bigger than Ebay, HP, and Sony...

 

So who was panic-buying this 'camera' company?

The Wall Street Journal has the answer...

Trading activity on Robinhood, an online brokerage platform, jumped by half on Thursday as Snap began trading, with 43% of users active that day buying shares, according to the company.

 

Robinhood’s demographic already skews to the younger side, with a median user age of 29, the company said. But the median age among Snap buyers on Thursday was even younger, at 26. (That happens to be the same age as Snap co-founder–and newly minted billionaire–Evan Spiegel.)

 

Rebecca Shoenthal, a 22-year-old journalism student at the University of North Carolina at Chapel Hill, was among them. She said she bought four shares of Snap for about $24 each. She put in an order for them on Wednesday night, stipulating that she would pay as much as $40 per share.

 

“I wanted to test the waters and play around with some money I wouldn’t be too devastated to lose,” Ms. Shoenthal said. “I think I’m going to stick it out for at least a few years.”

 

Ms. Shoenthal, who uses Snapchat every day, said this was her first big stock pick. She’s gotten interested in stocks this semester because of classes she’s taking on personal finance and branding. She thinks the prospects for Snap are bright, particularly given that Snapchat is changing the way many young people, including her friends, read the news.

 

There was also outsized attention from younger users on StockTwits, a popular social media platform used for sharing trading ideas. About 40% of users are between the ages of 18 and 34, but 60% of those following or viewing the stream of messages about Snap fell within that age range, the company said.

 

Kaleana Markley, a 29-year-old wellness consultant who lives in San Francisco, bought $100 worth of shares on Thursday using a company that offers gift cards for stocks, called Stockpile.

 

“I have high hopes” for Snap, Ms. Markley said. “I think they are doing really cool things.”

 

She doesn’t do much investing generally, citing student loans and the high cost of living in the Bay Area, but got excited by the talk of the IPO. One promising sign of the company’s growth prospects, she said: Even her parents are using it now.

As a reminder, Peter Lynch has actually recently clarified his now-mythical advice - which perhaps some Millennials should be paying attention to...

What’s wrong with the popular-wisdom version of his ideology, which is usually cited as “invest in what you know”?

 

It leaves out the role of serious fundamental stock research. “People buy a stock and they know nothing about it,” he says. “That’s gambling and it’s not good.”

Of course Millennials aren't alone in their "greater fool"-edness. One glimpse at the chart below - of the stock of a company called Snap Interactive - which exploded higher on the day that Snap Inc. announced its IPO... tells you all you need to know about the average stock market participant's attention to details.