tangtang520 - Fri 17 Apr, 2015 Post subject: But executives can dramatically improve the auracy of their Listening to Your Heart! plus articles and information on Inspirational Trying to predict stock price movements is necessary nike air max 90 essential australia , of course. After all, when stock prices fall, the cost of borrowing and of issuing new equity can rise, and falling stock prices can both undercut the confidence of employees and customers and handicap mergers. Unfortunately, however, most of these predictions are no more than rough guesses, because the tools CEOs use to make them are not very aurate. Net present value (NPV) may be useful for estimating the long-term intrinsic value of shares, but it is famously unreliable for predicting their price over the next few quarters. Conversations with sample groups of investors and analysts, conducted by the pany or by investment bankers, are no more reliable for gauging market reactions. But executives can dramatically improve the auracy of their predictions. By adopting a more systematic cheap nike air max 90 australia , rigorous approach, corporate leaders can learn to understand individual investors as thoroughly as many panies now understand each of their top mercial customers. It is possible to know such customers well because there are only so many of them. Equally, only a finite number of investors really matter when it es to predicting stock price movements. Every CEO knows that when buyers are more anxious to buy than sellers are to sell, share prices riseand that they fall when the reverse happens. But fewer CEOs know that not every buyer or seller matters in this equation. Our research on the changing stock prices of more than 50 large US and European listed panies over two years1 makes it clear that a maximum of only 100 current and potential investors significantly influence the share prices of most large panies. By identifying these critical individual investors and understanding what motivates them, executives can predict how they will react to announcementsand more aurately estimate the direction of stock prices. Armed with these new and solid insights about how critical investors behave in specific situations, executives can make strategic decisions in a different light. Knowing what makes crucial investors buy, sell, or hold the pany's stock allows CEOs to calculate what its share price might be after an announcement and to factor this calculation into their strategic and operating decisions. To head off short-term selling, a pany could manage the timing, pace asics shoes australia online , or sequencing of strategic announcements. It could introduce a new management team before announcing an acquisition. It could also test an important new product in selected markets before the nationwide rollout. How will investors react to a merger announcement and what will the resulting share price mean for a deal? How might a spin-off fare in the market? Does the pany need to prepare the market or to consider a carve-out instead? A CEO even has the choice of forging ahead in the face of adverse predictions, using the information to manage the expectations of the board. An executive may, for instance, consider bold strategies even though they could push some critical investors to sell the pany's stock. The few that matter It should e as no surprise that big trades can significantly move the needle on a pany's stock price. When the Bass family of Texas, for example, sold its stake in Disney, in September 2001, in response to a margin call, Disney's stock fell by 8 percent. But typically, short-term changes in a pany's stock price aren't the result of a single big trade. For the 50 panies whose quarterly stock price variations we studied cheap asics australia , we consistently found that the majority of unique changes in each pany's stock price resulted from the purchases and sales of the stock by a limited number of investors who traded in large quantities. (By "unique changes," we mean those ourring relative to the rest of the market. In other words, they do not include price bumps or falls that coincided with the overall movements of the market or the sector.) Although the number of crucial investors in a pany ranged from as few as 30 to (more typically) as many as 100, in each case this set of actors had a dramatic impact on share prices. In the panies we studied, we could attribute from 60 to 80 percent of all unique changes, quarter by quarter, to the trading imbalances of these investors. Industrial marketing for investors Few panies today get to know their top investors well enough to predict with any auracy what will make those investors buy or sell more of their shares. The CFO of a large financial pany, which was about to announce the divestiture of a major division, believed that he was "right on top of [our] investor base." Indeed, in a general way nike roshe run dynamic flywire for sale , the pany's executives knew the big investors wellwhat they thought of management, the creditworthiness of the pany, and so on. But executives didn't know what investors thought about specific potential strategies, such as a divestiture. Was the offer price that executives were considering above or below the value investors attributed to the unit when those investors calculated the pany's total value? Or did investors think that the pany benefited from cross-divisional synergies that would end with the divestiture? To develop the ability to make predictions about shareholders, panies should identify their stock price movers and calculate how many additional shares would be offered or sought in reaction to specific announcements. Through background analysis and interviews, the panies must then analyze in depth the trading behavior of these movers, developing trading profiles for each of them. Finally, panies should use the information in the profiles to predict which movers would be likely to react to specific corporate announcements by selling or buying in the short term and then calculate what this would mean for share prices. |
