Chiara Ferragni joins the board of Tod’s and the stock soars! +14% in yesterday alone.
This is an example on how investors and thus markets move on news and especially on expectations.
Most likely Ferragni will do well for the company and with her work, ideas and proposals, she could bring in more profits for Tod’s.
But these are just predictions, expectations. Investors try to look far ahead and invest in something that is not yet there and has not been defined. In this sense the market as Schiller says often moves on an “irrational euphoria.”
That said, the 14 percent increase in capitalization means a +120 million for Tod’s company just because of the news of Chiara Ferragni’s entry.
And that was in a single day. Without having worked on any projects yet.
It will be interesting to have a fundamental analysis on the stock and to understand in the near future what projects will be executed and how and when profits will increase (if they increase).
It often happens that on the news of higher earnings the stock falls in value in the market, and many people wonder why.
It is the logical consequence of the fact that its value had already been “discounted” long before the arrival of major profits.
As in this case. The stock today is worth 14 percent more than yesterday just on the idea that there will be profits.
By the time there are real profits that idea will have proved correct. But the value of the stock at that time will already have that “plus” of its own, so investors will take home the result. By selling their shares.
That’s why you have to be very careful in your investments. It is not necessarily the case that positive news of a company’s higher profits has the logical consequence of a rise in the stock price, because very often, as we can see, the price has already been previously discounted just by the fact of a positive forecast or news. From a “euphoria.”
