Headed for a Smaller Hat Size
On Halloween 2010, SodaStream (SODA) IPO'd at $17 and by summer of the next year the stock was trading $80 per share.
Yet, by Thanksgiving of 2011, it was back down to it's opening day trading range at $23. Of course, the real important moment for SodaStream was October 2014, when it broke down through the $23 level and had multiple closes under this old floor. SodaStream's big head has undoubtedly shrunk, and they now seem headed for a downgrade in hat size.
SodaStream reported today, and the numbers didn't look that bad. But the reality is that they are changing strategy from a syrup and hardware seller to a health conscious product line. I think market perception is that it is too difficult to change horses in the middle of the stream, and the short sellers are all over the stock every day. Instead of fearing the earnings surprises, they were happy to hear the change in strategy, and are keeping SODA as a core short against long other beverage makers.
Portfolio managers employ a market neutral strategy, whereas they are long The Coca-Cola Co. (KO) and short PepsiCo Inc. (PEP) (if I may simplify) and they choose who they think will be the winner in the industry. They also pick who they think the loser will be. You see this if you dissect the percentage of short sales for the top five volume trading stocks in any sector you choose. You can also see this when the selected short of these Market Neutral Managers has an unexpected quarter or positive news, and all the shorts need to run for cover.
The Hidden Advantage
NYSE and Nasdaq trading volume is dominated by hedge funds, mutual funds and some level of money manager who are pros. They get the best rates to clear the trades (they can do it much, much cheaper than you can) and they can carry larger positions for longer than you can. In short, they have an edge that makes any strategy (except buy and hold) nearly impossible.
The exchanges don't want to tell you this, and your broker will never tell you this, but the leverage money managers have improves their chances of success, and even then, it is the toughest game in town. Markets have a mind of their own, and they will go the wrong direction for days, months or years to drive any investor insane. Normally, the average investor gets shaken out of his long trade at the bottom of a pullback, where emotion overtakes any sense of logic. The best traders I ever knew had such lack of emotion (winning or losing) that they seemed detached from life on earth.
My suggestion is to go buy a used SodaStream on Craigslist, buy some Cola-type syrup, get a bottle of rum and a lime, and mix up a good Cuba Libra.....but dont' buy SODA stock because it seems headed for a smaller hat size.