Ocado Group (LON: OCDO) shares are up 2,32% this morning which, at least so far on Tuesday, makes the company the biggest riser amounts FTSE100 constituents. Whether that rise and that position will be maintained through the day is another matter of course. Ocado is also London's most shorted stock, something we've noted before about Ocado. As we pointed out back then there could be good reason for this too, with over 6.5% of the stock out on loan to those short sellers.
The basic problem is that Ocado has long been a jam tomorrow stock. Yes, obviously, building out an entirely new technology - those automated warehouses for online shopping - is going to swallow capital. So, as long as we all know that then we're fine with a company making losses as it develops. But at some point we're going to want to see the profits arising from such investment and a continual cry of “It's coming, it's coming” will wear off over time. Which is, to be crude about it, what's happening at Ocado. OK, so all the investment has happened, you've had the time to get it all right, so where are those promised profits?
Ocado share price from London Stock Exchange
This is especially true when Ocado sees itself - and was seen by the market - as a technology stock, not a mere shopping warehouse operator. The thought was that once the tech was perfected then it could be marketed on to other retailers in other countries. This hasn't proved as easy or profitable as was once assumed.
But the real lesson for us here is that time horizons matter hugely in investing. Yes, over time, weeks and months, a share price will move to its true and objective value. But there can be many twists and turns along the way. In fact, when we get down to the smallest price movement - the pip, or tenth of a percentage point - the next price movement, even the direction of it, is random. This is important for us as traders. We must make sure that we leave room in our positions for those short term, small and random movements if we are to be able to ride the longer paths to true and objective value. For as Ocado is showing, it's always possible for something we think should still be falling - all those short positions - to turn around and rise a couple of percent along the way.