How is it that a company can post double its expected returns for a quarter while the stock keeps tumbling ?

Question

I bought a stock in the energy sector a few weeks ago thinking it would be a good investment but it's been going down ever since- even while the latest quarterly earnings report shows it double the expected returns? I'm not a tech analysis expert so I don't know how this happens other than the company may be reinvesting all the gains in new projects rather than give back to the investors. Can someone give some clarification on this? I know some companies are known for paying high dividends and I'm thinking I should be investing with these companies rather than those that just have good "charts".

Answer 1

Stock prices are based on expected future earnings.  Not whats in the books already.  And oil and natural gas prices have been sliding.  That probably doesnt bode well for future earnings in the energy sector.

Answer 2

If you are an investor (long term) hang in there (if the company is a quality company)

Traders move with the institutions (mutual funds, hedge funds, the Buffetts) who move as herds within a herd and often they see a stock rational or not, but once herds form they dictate a stock price's direction for a period--this is trading, NOT investing

Answer 3

Just take a look at Google and Apple, they both had good earning with decent numbers google dropped 50 bucks after earnings, Apple did better than expected and dropped 10 dollars next day, because future outlook as well as the health of steve jobs was in question.

Then you have merril and Bank of America that have terrible numbers, just not as bad as first thought and they rally 30 percent in a week after losing billions.

Its all about future outlook and perceptions.

Answer 4

The market has very much to do with the price of stock. It is effected by speculators who trade volumes every day. Often a company is at the top of its industry but due to negative comments by economists, speculators and the media it is effected along with the whole industry. Charts are OK. Research is better if you have the time to do it properly.

Answer 5

A current stock price reflects the value based on future expectations.  It is a consensus opinion.  The reports are historical data.  Reported data can often be anticipated based on how well the industry or market sector (that the company is in) is currently doing.  It could also be unique news or legal problems that you have not read about.  Stable dividend income is an important part of any portfolio.

Answer 6

Many good stocks can be carried along by the "tide" of a bad market as different sectors rotate in and out of favor.  Invest for the long term (18-24 months).  Don't try "day trading."