Admittedly, I’ve never tried this to see if it works, but the dead count bounce theory is a simple notion applied to the financial world, but with obvious applications elsewhere in business.
The term “dead cat bounce” is derived from the idea that “even a dead cat will bounce if it falls from a great height.”
That’s the general thought behind the dead cat bounce, so how is it defined for businesses trading on the stock market?
The standard usage of the term is: A short rise in price of a stock which already suffered a fall. In other instances the term is used exclusively to refer to securities or stocks that are considered to be of low value. First, the securities have poor past performance. Second, the decline is “correct” in that the underlying business is weak (e.g. declining sales or shaky financials). Along with this, it is doubtful that the security will recover with better conditions (overall market or economy).
My Mac features a Dashboard Widget with stock prices for a number of companies I follow, including Apple, Microsoft, Google, Amazon, Yahoo!, and, yes, BlackBerry. Because the profit train keeps rumbling along, Apple’s stock price continues to explore all time highs.
Even Microsoft, without the albatross CEO, Steve Ballmer, has recovered nicely from the 10 year flatline, though I’m doubtful the Windows and Office maker has a profitable transition in the works from desktop and notebook to cloud and mobile, but that’s another story.
Yahoo! under Marissa Mayer continues to do well. The stock and the balance sheet, not the business. As to Google and Amazon, the bloom is off the rose, the shine is off the Shinola, as both companies have major problems venturing beyond their core business. While Google is massively profitable, the company is not diverse, has a string of product and investment failures, and remains what it has always been– an advertising company. Amazon doesn’t fare well, either, as Wall Street has grown impatient with a decade of few profits to show for all the effort and investment.
What of lowly BlackBerry?
The past dozen years or so tell the tale. BlackBerry’s glory years were mostly pre-iPhone. Once Apple’s flagship product began to dictate the smartphone marketplace, BlackBerry suffered almost as much as Nokia, and substantially so in recent years.
BlackBerry’s stock price is nearly double from a year ago, and up somewhat from earlier lows in 2014. Is this the dead cat bounce? If so, it’s not much of a bounce, despite a steady stream of public relations announcements recently about new security options for the enterprise and a willingness to play nice-nice with iOS and Android. The dead cat bounce may have been nearly two years ago when BBRY traded in the mid-teens.
So far, the stock market isn’t buying what BlackBerry is selling. I lost count, but it looks as if smartphone buyers are not willing to spend enough money to bring the company back from lives it has lost already. If the cat is dead already, a bounce won’t help investors much.