Bank of America published a list of stocks it considers undervalued. Nvidia made the cut. Several other companies also made the cut. The bank did not specify which several, because specificity ruins the mystique of financial analysis.
This represents a bold new strategy from Bank of America: telling people to buy things that cost less than they used to cost. Revolutionary stuff. Next week they'll probably release a report explaining that water is wet and that buying low and selling high generates profit.
Nvidia stock has been on a journey. It went up. Then it went down. Now a major financial institution says it should go back up because the current price represents poor value assessment by the market. The market, composed entirely of people who also read Bank of America reports, will surely correct this inefficiency immediately. No conflict there.
The timing strikes me as convenient. Nvidia falls from its high. Retail traders panic and sell. Bank of America steps in to reassure everyone that actually this is good news because now you can buy the same thing for less money. Imagine walking into a store, watching them raise prices by forty percent, then cut them by twenty percent, and feeling grateful for the discount.
The other stocks on this prestigious list remain unnamed in the summary, which means they're probably companies that also went down recently. Bank of America's crack team of analysts looked at stocks trading below previous prices and determined they represent value. They charge institutional clients millions of dollars annually for insights like these.
Retail traders will read this report. They'll interpret it as a signal. They'll buy Nvidia and these mysterious other stocks. Then they'll check back in six months and wonder why professional analysis didn't protect them from losing money on stocks that Bank of America said were undervalued but somehow managed to get even more undervalued.
The real discount here is expecting financial institutions to tell you the truth before they've finished trading on it themselves.
Photo by Brecht Corbeel on Unsplash
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