Ask TheStreet
Editor's note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.
A stock I own reported great earnings this morning, but the price hasn't really gone up. After the stock's recent run-up, I assume this is due to some profit-taking. Any thoughts on this scenario? -- Submitted via Stockpickr Answers It's hard to make short term assumptions about a stock. Stocks move up and down on any given day for countless reasons. And they usually move the most -- or at least attract the most volume
and attention -- when the company announces their quarterly earnings report because that's when they have the eyes of the investing world upon them.
GM GM, for example, recently announced a first quarter (2008) loss amounting to $5.74 per share, reflecting $2.9 billion in one-time charges. Seems like a loss that big that would be bad news and send the stock plummeting, right? Wrong. Investors sent GM's shares up 9.4% that day because without the one-time charges, GM only lost $350 million (or 62 cents per share), handily beating Wall Street's expectations.
So, as Chuck Berry said, "It goes to show you never can tell."
GM's "one-time items" included a $1.45 billion charge to reflect a change in the value of GM's 49% share in GMAC Financial Services. Ray Young, GM's executive vice president and chief financial officer, said the company revalued its stake because of losses in GMAC's residential mortgage division.
After a company announces earnings, the "Monday morning quarterbacking" begins. It's easy for analysts
, traders, talking heads and the like to come up with reasons for a stock's short term move "ex post facto."
For many individual investors, it's comforting to have a reason -- any reason -- as to why a stock moved one way or another in the past. But what you need to understand is how it will move in the future, right?
Here's what happens. If a company announces great earnings and the stock goes down, the so-called "market" may be "saying" that it does not like the company's guidance for the next quarter -- or next year. The market "commentators" may also attribute the drop in the stock -- after what seems like good news -- to be a result of profit-taking.
It's best to avoid that game entirely and think long term.
Some of the things that move stocks on any given day: analyst opinions (yes, they still matter), short covering, earnings, rumors and other news. And of course, stocks move with the broader market every day like a toy sailboat caught in the tide.
Don't chase that boat -- let's call it the good ship "Momentum" -- too far into the ocean and get caught in the undertow.
Like a stock, but the sector's not hot? Here's a look at contrarian investing.
How much do you really know about measuring risk? Here are nine ways to sharpen your investment skills.
What would you talk about with Warren Buffett? Here's a look at San Diego State investors' recent meeting with the 'Oracle of Omaha.'
You've decided you need help managing your money. Here's how to find the expert who's right for you.
David Peltier answers questions on Pfizer, Altria and more.
James Altucher answers questions on inflation hedge stock plays.
Jim Cramer answers questions on steel stocks, EMC and more.
Here's a look at how to cut through the glossy clutter and find what you're looking for.
Yahoo! is among the most searched stocks on TheStreet.com. Here's what Cramer had to say about the stock recently.
Catch up on his thinking on the hottest topics of the past week.
Investors will have to deal with a Fed meeting and another flood of earnings and economic data.
Ensco International and Echelon have the potential to move higher in coming days.
See who made what calls.
The addition of video is helping telecom companies compete against cable and satellite companies.
The June West Texas Intermediate contract reflects selling pressure ahead of Tuesday's expiration. But stocks in the sector are generally trading higher.
See who made what calls.
Keep on top of the market and the critical information you need to make more profitable investing decisions.
Sponsored by:

ACCESS REALMONEY


