Company Related Information/News
Investors should always be vigilant, to stay one step ahead of the game by looking at all information sources sent out by companies in the form of news paper articles, CEO forums, Investor forums and news on corporate websites. But all information should not be taken with positive sentiments; a cautious approach should be taken and comparisons made with other stocks in the same sector, since all information may not be true or practical in economic or rather business sense. Investors should be extra cautious about market rumors regarding takeovers, mergers or even rumors about a large chunk of shares changing hands. You should think rationally and ask the question, is the stock really worth at these levels and how compatible are these acquisitions or mergers in the business sense.
Research Paper by Analyst
Research papers published by Research/Financial Analyst on the market, economy and especially on stocks may have a significant impact on the price. As once the paper is completed and published the brokering firm publishing the report tends to buy or sell the stock, resulting in significant price movements. However it should be noted that investors should not get car ride away too much in the case of a buy recommendation and the price moves up significantly. An analyst would normally specify a price range within which the stock should be accumulated, beyond which the stock would seem less attractive based on future earnings.
Investors, especially the retailers tend to pay less emphasis on the economic reports or central bank statistics published on a quarterly basis. The fact is that if the economy is growing and the market is not, means that the market is very much undervalued. On the other hand, the institutional and high net worth investors anticipate the future economic changes and benefit a great deal from actually collecting fundamentally sound stocks at extremely low prices. This would result in the stocks upward movement slowing down once the actual economic data is published.
Political News and Sentiment
The Sri Lankan stock market is highly driven by political developments, resulting in the overall sentiment changing radically. The market activity and momentum is usually maintained by the retail investors. (Looking for quick capital gains) Therefore if there is any negative news in the political arena retailers tend to overreact causing the prices to drop and the sentiment to weaken. However, the high net worth’s and institutions tend to benefit by this artificial downfall by collecting sound stocks at a discount. Hence it’s quite advisable not to panic on political news but to stay invested or by collecting more fundamental stocks at artificially low prices.
Finally the bottom line is that investors should be well informed about the macro situation as well as the company specific information to make informed decisions and to stay ahead in this game.