Shares of AquaBounty Technologies (AQB 4.33%) fell on Wednesday, following a bearish technical analysis shared by well-known TV personality Jim Cramer. As of noon EDT, the stock was down 16%.
Cramer had AquaBounty CEO Sylvia Wulf on his CNBC Mad Money program on Tuesday night. During the segment he allowed Wulf to talk about the advantages of the company's land-based farms for genetically modified salmon. However, an article was published by Real Money (shared by Cramer on social media) after the show that seems to have the stock falling today. The article presented a technical analysis, which concluded with a "grim forecast" and a recommendation to avoid going long (buying shares) on AquaBounty stock.
In my opinion, there's a two-fold reason why technical analysis isn't the best way to research stocks. First, it's backwards-looking -- it uses the previous movements of a stock to predict future movements. But past stock movements can't account for new developments with the actual business. Second, technical analysis is short-term thinking. It could occasionally prove useful this week or month, but it doesn't project three to five years ahead. Yet having a long-term mindset is precisely how I believe ordinary investors can produce extraordinary results.
Therefore, I'd encourage AquaBounty's current shareholders and potential investors to keep the business fundamentals front and center. And when thinking about the business, here's two things to keep in mind. First, its initial commercial harvest of AquAdvantage salmon was postponed in 2020 because of poor salmon prices, which is disappointing. Although the company hopes to proceed with this harvest in April, it's a reminder of the nature of this business -- it will be subject to the market price per pound for salmon.
Second, and more encouragingly, AquaBounty has raised enough cash (through stock offerings) to start building a new farm that will really bring scale to this salmon farming business. That said, considering it has yet to start construction on this facility, we are still a longs ways away from this small-cap stock generating meaningful revenue. Therefore, investors today will need to be extremely patient and look beyond where any technical analysis will allow.