Tuesday, July 22, 2014

Can you see the BIG PICTURE: Part 2


  Today I would like to continue the topic of seeing the BIG PICTURE by talking about "news events". 
  There are different types of "news events" in the life of the company's stock.
  Those of you who trade stocks most likely are familiar with such event as Upgrade/Downgrade of the company. Usually it's a press release by well known rating agency. Most famous are Moody's, S&P, Fitch, Morgan Stanley, JP Morgan, Goldman Sacks, UBS, Deutsche Bank, Bank of America, Jefferies. 
  There are also less known agencies which come out from the silence once in a while to issue report on some non-popular stock. These agencies usually specialize on sketchy penny stock. A lot of you know these stocks as pump&dumps. 
  Upgrades/Downgrades usually swing between:
  • strong sell
  • sell
  • hold
  • buy
  • strong buy
Every agency has it's own scale but general idea of the scaling stays the same.
  Another "news event" for a stock is quarterly and annual Earnings Releases. It's a press release which describes of how did the company do financially in last quarter/year. Also it gives comparison for actual earning per share with:
  • "the street estimate" 
  •  same period of previous year
Estimate is made by same agencies we've talked about when talking about upgrades/downgrades. Usually this data is published by PR Newswire.
  Another "news event" would be some sort of an article or blog post by some sort of analyst. Among the most famous and influential websites are bloomberg.com, marketwatch.com, thestreet.com, wsj.com SeekingAlpha.com, MontleyFool.com, Zacks.com, theflyonthewall.com.
  Another "news" event for the stock would be positive/negative mentioning about the company on TV show or radio. Here TV channels by CNBC ans Bloomberg are major players. "Mad money" hosted by Jim Cramer is a very popular show. Good example of such company mentioning was today's Bill Ackman's talk about HerbaLife (NYSE:HLF).

  News about insider buying/selling could be also treated as company "news event". Insiders are people who directly work for the company and occupying senior roles such as CEO, COO, CFO, CTO.

  Once we know now about all these company "news events" lets talk about...why are these news are available to the public.
  Every year rating agencies spend millions on company's business research. But somehow they are being so generous and give away results of these studies to the general public...for free. In did, we can hear from TV screens and read in news papers that "Goldman downgrades Ford" and "JP Morgan is optimistic on AIG future". 
  Why they give average Joe such a valuable results of their research? Or is it valuable...Hmmmm
Let's see....
Bellow are screenshots of the chart of CRM and history of rating updates:

On this day company release what seems like a great Earnings Release. As we see from screenshot #2 at least 8 different rating agencies issued reiterated buy or strong buy rating and increased their targets.
   And as we see that was the exact day when everything started to fall apart for this stock. Do you think that this is a simple coincidence? Take a look on the increased volume that day. 
  ...wall street was aggressively selling shares to fly-high optimistic crowd. 

To be continue...

 remember and think about "Apple will hit $1000", "Facebook IPO disapointment"....and pay attention to GPRO news-chart development.