Rimm's "intrinsic value" is likely dropping....why would you buy more? People seem to assume that IV is fixed and certain while price is variable....but IV seems to be pretty variable when it comes to these tech stocks...
I disagree. IV doesn't change. Your perception of IV changes along the turbulent path of discovery. You keep trying to predict the unpredictable, and blame it on the IV of the business rapidly changing. No.
To get the IV prediction accurate with a higher batting average, and thus fewer investment mistakes, stick to businesses that are more predictable. (that's a "Duh" comment).
I guess that by definition of the term "predictable business", you then realize that your IV number is a "prediction of the business"... well, more of the obvious.
I would say IV changes in some cases and doesn't in other cases.
For example, due to the fact that AMZN is trading at extremely inflated multiples for prolonged time, it is able to issue a small amount of equity to do a lot of things. The IV increase whenever it issues the equity at such extremely inflated multiples. You can run some simple math. Suppose AMZN's book value is $10 per share, and it issues equity at $200 per share and doubles the share count, what is the book value now? It is $105 per share! Who can create value faster than this? Buffet clearly cannot!
Then if the market thinks OMG, AMZN is much cheaper now than before, buy a ton! Then the stock price will jump to maybe $400. Then they can do this game again and again and the book value will increase a lot consistently.
For other companies, if the stock price is distressed and it gets some liquidity issue and is forced to issue equity, the IV will drop a lot, depending on how dilutive it is.
