Heart Test Laboratories (NASDAQ: HSCS) stock is up 300% this morning. No, there’s no news driving HSCS, nothing at all. No announcements, results or in fact anything of interest. There’s the stock price moving and that really is about it. So, a useful conclusion is that the stock price is moving because the stock price is moving - what we know as a momentum trade. The thing about such momentum trades is that they do end and then - often enough - reverse. The difficulty is in knowing when they’ll do that, the whether is pretty much baked into the original supposition. They can thus be very fun but also wholly wallet endangering.
The business line: “Heart Test Laboratories, Inc., a medical technology company, provides cardiovascular diagnostic devices. The company offers MyoVista wavECG, a resting 12-lead electrocardiograph (ECG) to provide diagnostic information related to cardiac dysfunction, as well as conventional ECG information. It serves clinics, doctor’s offices, urgent care centers, and hospitals.” Well, OK. That’s not something we’d expect to lead a storming charge of a rise in a stock price.
Heart Test Laboratories stock price from Google Finance
But there it is, there is that 300% stock price rise. There is this from 6 weeks back though: “Heart Test Laboratories (NASDAQ:HSCS) stock is on the move Thursday after announcing an agreement with the Icahn School of Medicine at Mount Sinai. This new agreement has Heart Test Laboratories’ HeartSciences working with Icahn Mount Sinai to commercialize electrocardiographic artificial intelligence (AI) algorithms and assets. This covers” tens of millions of ECG records” that will allow the AI to develop disease detection algorithms.”
And, yes, well. Access to a set of records that can then be used to train an AI. Sorta interesting but we really don’t think that explains a 300% rise in market capitalisation. Especially not 6 weeks later.
Our assumption is this. Heart Test started at an under $2 million market capitalisation - a true nanocap. It doesn’t take much buying to start a price move going, especially in the thin out of hours markets. Add in something like “Oooh, but they do AI!” or something equally fashionable and a speculative flurry can be started. Which is what we think is happening here - and no more. Obviously, if another truth emerges we will update. But we think this is a momentum trade and no more - the big question about those always being OK, when’s it going to stop and reverse?
