Quote from: ElectricMucus on January 21, 2013, 02:17:49 PM

That didn't work out too well last time did it?
It only needs a few fat finger trades to ruin it, sure $100 can happen in a flinch - the question is if it will rise further on its own. Nobody wants to overpay for an asset, no matter how good (you think) the fundamentals may sound.

Let's say you're a manager of a big tech fund looking to allocate into a new asset. It's back in 2001 and Apple just released its first iPod. You're knowledgeable enough to assess the technology and its economic implications and smart enough to see the potential of the product and the company. Your run your models and it looks all good.

The stock is out of favor though, trading at about 7.70 USD. It went through a violent bubble just a year ago, reaching 35 bucks before crushing to single digits. Not many people appreciate it, and some doubt that the company will even survive.

Do you know for sure this dog of a stock will become a 100-bagger in the next 10 years? Not really, but your models, fundamental analysis and intuition all agree that it is grossly undervalued.

Once you decided to invest, do you aggressively bid the stock up, trying to impose you vision of AAPL valuation on the market? Not really, you patiently accumulate trying not to overpay and hope that you have enough time to form your position before market reevaluates the stock.

What good is it to you if you're bidding the price up aggressively? Can you create a temporary price bubble? Quite possibly, if you possess enough funds. Will it influence other people's view of the stock? Very little, they have their own vision that evolves at their own pace. So, once you stop pumping the stock it will slide right back down where the current market consensus is. So, there is no benefit to you in it, as you cannot exit your position easily - it's just to big. You can only exit at market consensus price or even at a discount.

If you are right about the stock fundamentals and its long-term valuation, the market consensus will evolve over time and the price will appreciate long-term, regardless of temporary ups and downs, bubbles and crashes. You'll get your 100-bagger or whatever your luck is. If you are wrong, no amount of price pumping can possibly do you any good.