One of my personal investing mottos is "the market is straight up kooky dooks".

Not only did I think of this saying again today, I also felt it fitting that it was paraphrased from a movie – in this case the Disney (NYSE: DIS) animated movie Moana.

That is because, as I woke up this morning and checked the overnight news, I saw that the share price of American cinema company, AMC Entertainment (NYSE: AMC), increased by over 78% overnight.

On a whim, I then looked at the share price of GameStop (NYSE: GME), a company whose story is now intrinsically linked with AMC Entertainment. Yep, it too saw its share price rise dramatically overnight. In this case 75%.

It appears the "meme stock" days are back.

My first feeling was one of sadness.

I hoped that this was a saga that we left back in the dark days of the COVID pandemic. Whilst many saw it as an entertaining side show, or even a David vs Goliath story, I saw it differently. I knew that a lot of regular people were going to lose a lot of money that they couldn't afford to lose.

I watched with horror as people, many who were entering the markets for the very first time, piled into, what I believed to be, "bad" companies.

I've seen this film before. I know how it ends and I don't like it.

Unsurprisingly, fast forward a few years later, and the share price of AMC Cinemas is down over 99% and GameStop down 59% from their 2021 peaks. I am sure many of those who were wiped out will never trust the share market again despite it being, overall, a great tool for people looking to build wealth.

So, it is again I feel my stomach churn seeing the potential sequel with people piling into companies which, in my opinion, have really bad fundamentals and are suffering from an enormous list of structural headwinds that they will struggle to overcome.

I could go on and on about the various tips, techniques and lessons that I have learned to become the investor I am today. I could also go on for pages highlighting why I personally wouldn't touch the shares of the above businesses with a 100-foot pole. However, in this case, I feel there is only one thing to remind you all…

Whilst the share market can, and will, do almost anything in the short term. Over the long term, share prices tend to, almost always, track the fundamentals of the underlying business.

Some meme stockers will tell you that fundamentals don't matter. They are playing a different game. They'll tell you to just trust them. That I am part of the enormous Wall Street conspiracy looking to keep the regular folk down.

But fundamentals do matter. In fact, if you plan on holding for years, you can argue that they are the only thing that matter.

So, if you find yourself looking at the recent share price rise of companies like AMC Entertainment and GameStop and getting tempted to press "Buy", ask yourself, do I think these companies have good fundamentals? Do I think these companies are going to be earning significantly more revenue and profits in 2, 3, 5, 10 years' time than they are today?

If you, like a lot of others, think the answer is no. Then don't buy.

There are countless other opportunities (both from listed companies and passive investment vehicles like ETFs) that offer high quality, growing and profitable opportunities. So, don't waste your time trying to ride a wave of what many consider to be irrationality.

All you really need to do is buy great companies, at fair prices, and hold on to them for as long as they remain great companies.

It is that simple.

This is also the best way to make a short seller's life miserable, much better than trying to outsmart them by trying to fight them directly when the fundamentals are against you.

The post Invest in quality, not meme stocks appeared first on The Motley Fool Australia.

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Motley Fool contributor Andrew Legget has positions in Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Walt Disney. The Motley Fool Australia has recommended Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

For a double feature, the movies Barbie and Oppenheimer couldn't be more different.

One is colourful and fun. The other is dark and broody.

Yet, the release of both has led to a level of excitement for films and cinema that hasn't been seen for some time. In fact, the odd couple led to the biggest weekend in Australian cinema history.

So, are we entering a new golden age of cinema? Unfortunately, I don't think so.

Excluding the COVID years of 2020 and 2021 where cinemas were effectively shut down, the most recent full year of 2022 was the lowest on record since 2007. This is despite 2022 including the third and 12th highest grossing films of all time, two Marvel movies, and the Jurassic World finale.

In regard to total admissions, you have to go back to 1993 to find a year where fewer Australians bought a ticket to see a movie at the cinemas. Perhaps this is also why the number of cinema seats have been declining steadily since 2010.

Now don't get me wrong, there is a good chance that 2023 is better – and some data sources show that with six months left of the year, it will be. But one summer doesn't make a lifetime, regardless of how optimistic Barbie is about every day from now until forever being the best day.

And there is a good lesson in this for investors.

There is no doubt that we will see many positive headlines about the success of Barbenheimer. I have already seen many have jumped on their success to say that cinemas are back.

We see the same thing on the sharemarket. 

Whether it is AI, the metaverse, blockchain, or the odd phenomenon known as meme stocks, there are always areas of the market where people rush to buy in a euphoric stampede. 

Just like Barbieland, the sun seems bright and the sky the clearest blue in these segments that appear to offer so much promise. But, when you dig under the surface, it can start to look a lot grittier, much like Oppenheimer. Those hopes of riches can quickly evaporate like a nuclear blast when reality sets in.

In regard to cinema, after analysing the data like an investor should, I don't see a resurgent industry. 

Instead, I see a narrative of all the planets that need to align to get people back into the cinemas. Most notably, big budget films with a star-studded cast, top directors and, at least in Barbie's case, more money spent on marketing than what was spent to make the film.

For investors, it is yet another reminder of how easy it is for us humans to get caught up in the hype of something cool. Unlike moviegoers flocking to and being entertained by Barbie and Oppenheimer, however, investing in hype can be an expensive and unpleasant experience.

So, yes. Perhaps Barbie was right. In the case of cinemas, this was probably the 'best day ever'. At least in recent times. But don't expect it to be so for every day from now until forever. It definitely doesn't make me interested in investing in cinema operators like EVT Limited (ASX:EVT) and AMC Entertainment (NYSE:AMC).

The same is probably true for whatever 'next big thing' is getting investors excited on global share markets when you read this.

So, take a lesson from Barbenheimer. Embrace optimism – there's no point investing if you aren't. But make sure to focus on the fundamentals. Also, stay in the (often more boring) real world, rather than investing in Barbieland. This is the path to long-term investing success.

The post What the Barbenheimer hype can teach us about investing appeared first on The Motley Fool Australia.

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Motley Fool contributor Andrew Legget has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

When Neil Armstrong first stepped on the moon, he said, "That's one small step for man, one giant leap for mankind". Since that day, countless others have turned their heads towards the skies and dreamed of reaching space.

Unfortunately, that dream appears to have been one step too far for Electro Optic Systems (ASX: EOS) and its share price on Thursday.

At the time of writing, shares in the defence and space systems company are swapping hands for 51.5 cents apiece. This means the Electro Optic Systems share price is down 28.5% from yesterday's closing price.

What occurred today?

Today, Electro Optic Systems released its results for the first half of the 2022 financial year. They were the very first set of results under the helm of new chief executive Andreas Schwer, who joined the company just over a month ago. 

It was Clive Cuthell, the new company CFO, who had the harder task, releasing a disappointing set of results only three days after joining the company.

The Motley Fool Australia reported on the first half results earlier today. In short, whatever way you look at it, it was an ugly set of numbers.

In the company's defence, many of the reasons for the poor results were out of its control. Delayed customer contract awards and supply chain challenges meant it was hard for the company to win new projects, and also caused delays in existing projects. It's hard to deliver a remote weapon system and turret to a customer when the customer hasn't already received the vehicle it is to be installed upon.

However, the major story is not the numbers but a significant shift in its strategy.

A change of plans

For the better part of a year, the major focus for Electro Optic Systems has been its mid-Earth orbit satellite constellation known as 'Spacelink'.

The company claimed that Spacelink when launched, would be able to offer continuous, real-time data connectivity to satellites. The issue is that Spacelink also required significant capital, a task made harder by capital markets drying up for such projects.

It appears this capital might have been for nothing, with the new management setting December 2022 as the day of reckoning when Spacelink must be sold. If it can't be sold, management will look at all other options, including liquidating the business. Either way, Spacelink will no longer be a priority, and a $54.4 million write-down will be hitting the company's books.

Instead, Electro Optic Systems appears to want to keep its feet on the ground.

Steps forward for the Electro Optic Systems share price

In short, quite like many other former highflyers, the company is drawing a line in the sand and focusing on profit. Still, management is also keen to stress that it isn't all doom and gloom.

Firstly, Electro Optic Systems has not lost any of the contracts it has been awarded. In fact, it has some new opportunities in the pipeline. One example is the potential to offer remote weapon systems to Ukraine. This might provide a short-term boost to revenue whilst it waits for delays in its other contracts to subside.

If Electro Optic Systems can get this shift right, a new, more profitable, and lower-risk version of the company could arise. Albeit possibly one with lower growth potential. 

However, this requires a bit of faith from investors. Many of whom may find such faith in short supply given the company's financial and stock price performance over the last year.

The Electro Optic Systems share price is back to where it was when revenue was only a fraction of what it is now. If it can become a profitable and more sustainable company, this might be an interesting entry point for those willing to take the risk and be (very) patient.

It could take years for the company to return to a better place, and there are a lot of obstacles it will need to overcome in the meantime.

The post Is the Electro Optic Systems share price now a massive bargain or a falling knife? appeared first on The Motley Fool Australia.

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Motley Fool contributor Andrew Legget has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Since forming back in 2015, 'buy now, pay later' payments company Afterpay Holdings Ltd (ASX:AFY) has been a hit with customers and retailers alike with more than 356 thousands customers and more than 2000 retailers now using the company as at its half year 2017 results.

In fact, during a business update back in early April, the company disclosed that Afterpay now processes around 3% of all Australian online retail sales and 15% of all Australian online fashion retail sales as well as more retailers signing up to the popular platform. It also recently released its first iPhone app which debuted in the 'top 15 free apps' and even hit number one for a brief period. Indeed, it has been a big year for the company.

However, the news today that Afterpay has been selected as the exclusive 'buy now, pay later' option for popular New Zealand website Trade Me Group Ltd (ASX:TME) is the biggest as it marks the first time that Afterpay has entered a market outside of Australia.

Although the name Trade Me is unknown to many Aussies, it is a dominant business in New Zealand. Trade Me is New Zealand's most visited ecommerce website with almost 1.8 million people visiting the website every month and more than NZD$422 million in sales activity in the six months to December 31.

Although there is still plenty of growth potential in Australia remaining (both online and in-store), the biggest opportunity comes from growing Internationally (along with entering other customer facing businesses such as services and travel).

If the Kiwis latch onto Afterpay like their Australian brothers and sisters have, then Trade Me is unlikely to be the only New Zealand business we see using the service before the year is out.

The post Afterpay Crosses the Ditch appeared first on The Motley Fool Australia.

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Never has a humble breakfast been so controversial.

Millennials, or those born between 1982 and 2002, have been attacked for their breakfast choices and how their love of the humble avocado is keeping them out of the property market rather than any external factor. It seems, when it comes to buying property, choose your breakfasts wisely.

Of course, the avocado metaphor is exactly that (a metaphor) and it would be flippant of me to take it so literally. But even the general idea that, there is no housing affordability crisis and the only thing keeping millennials out of the property market is their desire for a 'lavish' lifestyle, is quite simplistic and one most at the Fool disagree with.

But fear not my fellow millennials. Whilst property remains out of reach, there are other options to build wealth that you can take advantage of right now — and it is in your interests to get started as soon as possible.

You see, when it comes to getting rich (and isn't that what we all want to do?) the key component is time. And unlike the grumpy old suits throwing around the avocado example, it is something millennials have a lot of.

To see why this is important, look at the chart below.

The chart follows four people who each invest $5000 a year until they are 60 years old and earn a yearly return of 6%.

The results are powerfully clear. Despite the only difference being the total years invested, the person who started investing at 20 years of age (the millennial) ended up with around $825,000. This is almost double the runner-up and more than 10 times the amount the 50-year-old would have by the time they reach 60 years of age.

In reality, the situation is even better for the millennials. The above example ignores income from dividends which should grow along with the portfolio and can be reinvested. Throw this passive income stream in and the millennial would be a millionaire and the gap between them and the other four would only increase.

Why did I choose the six percent figure? Well, this is the approximate average return of the 'All Ordinaries Index' (which is an indicator of the performance of the general market), going back to 1994. Indeed, this is a benchmark most investors (including us) will try to beat.

So, millennials, ignore the barbs being thrown your way and enjoy your smashed avo. Use poor housing affordability to look elsewhere to build wealth and generate financial security through investing on the ASX. If you are unsure how, we will gladly help you.

The post Millennials, enjoy your avocados and start investing now! appeared first on The Motley Fool Australia.

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