Sector

What governs the decision of millions of investors and traders in the market is the general condition of the economy and how the present situation affects each individual stock. For instance you plan on buying stocks of Wal-mart (WMT) and Ford Motor Company (F) but the present credit market is sluggish due to an increasing interest rate, because of this people would spend less or couldn't afford much of what they want. How is this going to affect these stocks you intend to buy? Wal-mart is a retailer, therefore if people spends moderately on items they needed, Wal-mart might have earnings much lesser than what is expected. Stocks somewhat acts as a company's report card, if they can't deliver what is expected, they would be graded lower by investors or traders reflected on its share price. As for Ford Motor Company, disregarding its accounting side, when credit is tight, it is harder for consumers to get the best price therefore sales for the company would be less. This applies for all public companies under the affected sector, therefore rankings should well be regarded, as the worst performing company in the sector is likely to be hammered more than the leading company in the sector. Another example is when the local currency is weakening across a board of other currencies. This sounds bad for the economy but if you dig deeper, you'll realize that it's cheaper for foreign countries to import products. This condition increases the volume of orders from overseas and creates bigger revenues for the exporting companies. There is one clear and obvious action here, that is to focus on a sector that benefits from a weaker local currency like automobiles.

Previous | Next

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use