How to turn $100 into $9.6 Billion

Dien,
I always hear it said that most good stocks are now priced for 'perfection' and it doesn't take but a smidgeon of negative news to cause a sell off. Down-grades, upgrades or a shake of the head from an influential analyst can cause powerful movements in a stock price.

Also, have you ever noticed how often a stock closes lower on the day it was 'upgraded' early that morning? Many smart cookies feel that the stock will 'gap up' on the morning open on that good news, and then they short the stock after the first few minutes when it is at it's 'high' for the day. Then, at the close of the day (or during the noon lull period) when the daytraders close their positions, the person who shorted the stock covers his position at the low of the day and makes his/her money off that play.

So, people are rushing in to buy on that analyst's 'upgrade' and by the end of the day, the stock is sometimes lower than it was the day before. And the newbie 'investors' are left scratching their head and wondering what happened since they thought they were buying a good stock!

And, sometimes, it seems to be a way that allows for 'dumping of stock' by institutions at premium prices. They know how to take advantage of those 'upgrades' to exit their positions in the flurry of excitement when new investors are rushing in on the news.

Ah, the games that people do play on Wallstreet.
~Amber

> Sometimes expected earnings growth is
> already built into the price of the stock.
> (This is especially true for stocks with a
> high P/E -- price/earnings ratio.... The P/E
> is usually given in stock listings in
> newspapers or online....) Investors are
> already *expecting* a certain level of
> earnings growth each year....

> It is then possible that earnings can still
> grow, but not as high as expected. In that
> case, the price could go down, since the
> stock could have been *over-valued*!

> For example, maybe many investors are
> expecting 30% growth in earnings one year,
> and this has been factored into the price of
> the stock already (a high P/E is a sign of
> this sort of thing)....

> However, let's say the company releases its
> financial results, and growth was only 20%.
> In that case, the price could go *down*,
> because the current price could be too
> *high* given the company's performance....

> Dien Rice