By Sean Corey
Contributing Writer
Stocks are simply ownership shares in a company. If you own a stock of a company you are part owner of that company. Being an stockholder entitles you to the financial profits of the company and gives you a vote in the corporate governance of the company. If the financial profits of a company keep growing, an investor will be willing to pay more for a share of ownership, and the price of a stock goes up. Conversely, if an investor predicts a company’s profits will decrease, the value of owning a share of ownership decreases, and the price of the stock goes down. Every time the price of a stock moves it’s because investors change their expectations on the company’s profits. It’s important to realize that the stock price reflects expectations for a company, not how profitable the company currently is. That is why we often see a company’s stock go down even if it made billions of dollars; it simply didn’t make as much as people expected.
This explains why stocks have been down so much in the past few weeks. For example, the S&P 500, a collection of stocks from 500 American companies, is down more than four percent down from one month ago. There is a number of reasons for this: poor job growth in the United States during the month of December, slowing growth in China and inflation in Argentina, Turkey, and India. Monthly job growth in the United States is closely looked at in stock prices. Slow or negative job growth will hurt company earnings since people will have less money to spend. Slowing growth in China and inflation in Argentina will hurt exports to those counties and, in turn, negatively impact the earnings of companies.
Today will be a big day for the markets since unemployment and job numbers come out for January.
This Week in SIMM
Long Fund: $264,739
Energy Fund: $278,400
GAINERS
American Capital (AGNC) 4.38%
McDonald’s (MCD) 0.57%
Teva Pharmaceutical (TEVA) 0.77%
Caterpillar (CAT) 0.45%
LOSERS
Boeing (BA) -7.73%
Altria (MO) -5.73%
Cheniere Energy (LNG) -5.48%
Apache (APA) -4.69%
Trading Activity
DON’T BUY
Coca-Cola FEMSA (KOF),
Coca-Cola FEMSA bottles and distributes Coca-Cola products in Mexico, Philippines and much of South America. The stock appears to be undervalued since it has fallen more than 42 percent since May 2013. However, a proposed soda tax in Mexico and increased competition from Pepsi will dampen sales and reduce earnings in Mexico, their biggest market. High inflation in South American countries, such as Argentina, also poses a threat. Even though it appears to be selling at a value, the risks are too great to justify a buy.
coreysm10@bonaventure.edu
