Wasn't into stocks, trading, investing pre-2008. During recessions and down cycles do oversold company stock prices meet analyst expectations or do they generally fall off a cliff with the entire market? Hard to really pose the question I'm trying to ask, and I understand this is a very general question, so feel free to glean whatever you think I'm trying to ask in answering this question. I guess I'm seeing a market in sketchy territory and worried about longer term discounted stocks I'm looking at getting into that may need a year to hit their expected value. Thanks in advance.
Only dumb question is the one that goes unasked?
- Thread starter Bugsy
- Start date
Baron
ET Founder
It just depends on how the earnings are relative to the expectations. If an analyst gets guidance and lowers the expectations of earnings accordingly, then the stock price can stay relatively stable as long as the company meets or exceeds those lowered expectations. But no matter what the earnings are, never forget that you will always be at the mercy of large investors and institutions. If they decide to dump their holdings at any point (even after an excellent earnings report), there's going to be a significant slide in the price as all those shares are unloaded.
"Yes."
Market price is based not only on the business in question, but on the overall market, as well -- so if your stock is doing crappy, but everybody else is doing *really* crappy, you will see your stock go up. Meh!
And then there's Baron's observation: no matter the (immediate) relative value, if The Big Boys decide to lose your stock, its price *will* be driven down.
Crap!
So, 3 agendas to watch at once: Business Risk, Market Risk, and Market Risk{institutional}.
At the moment, the largest group of discounted stocks are the small caps (low capitilization).
Money is flowing largely into large caps via institutional money, so their valuations as a whole are higher than the small caps.
Whether this quirk remains long term is uncertain but I'm assuming so as small caps generally speaking carry more business risk and are viewed as being more speculative.
My impression is, should the market hit a down draught, large caps will most likely peel off their lofty valuations and some institutional money will rotate back into the smaller cap sector.
https://www.cnbc.com/2019/07/11/small-caps-are-flashing-a-warning-signal-ignore-at-your-peril.html
The p/e of the Russell2000 versus that of the S&P??? Been a mystery to me for so long. And let's check out the NASDAQ while we're at it -- it's been the "p" leader for so long: how's the "e" end of things?
I just scratch my head, and tell myself that a sensible narrative will be along, *sometime*.....
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''Worried??'' JULY may close down, AUG also; but bull markets climb a wall of worry.May want to invest in a Stock Traders Almanac/Hirsch?? I have; good investment. Prelection years tend to be superstrong.
''Fall off a cliff??''LOL That's not aproblem in a bear market trend/downtrend; the problem is they keep falling off a cliff/smashed/gap down + KEEP FALLING OFF A CLIFF.and some never re cover...……………………………………………………………………………………………………………..
That's why so many millionaires buy/invest in good mutual funds+ ETFs..
,Good question Bugs