Factors Affecting Stock Prices | Marvin Germo

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Factors Affecting Stock Prices

By: Marvin Germo | March 7, 2019

Stocks Will Go Down

Ayala Land, Ayala Corporation, SM Prime Holdings, BDO, SM Investments, Metro Pacific Investments, BPI, Metrobank are all good companies that have shown how good their brand and business models are. In spite of that, most of these stocks are all down and are being battered. There is no way we can change the inevitable because there will always be a time when the stock prices are down then go back to its high value. Whether you are new to investing or you have been playing in the stock market for quite a while now, you must understand the factors affecting the prices of stock. So why do good stocks go down?

Catch me in my live training events! (quick plug)

The heart of why I do this seminars is I want to build a generation of Filipinos with the right foundation in stock investing.  I want to bring smart investing to every Filipino around the world! If you would like to know more on how you could time the market checkout the trainings below.

Stock Smarts Cebu —  April 6 & 7, 2019
Investing Insights Japan – April 13, 2019
Stock Smarts Singapore —  May 18 & 19, 2019
Investment Conference 2019 – May 25, 2019
Stock Smarts Manila —  June 15, 16, 22, 23, & 29, 2019
Stock Smarts Iloilo – July 6 & 7, 2019
Stock Smarts Cagayan De Oro – July 20 & 21, 2019
Stock Smarts Hong Kong – August 11, 2019
Stock Smarts UAE – August 30 – September 3, 2019
Stock Smarts Qatar —  October 3 – 6, 2019
Stock Smarts Taiwan – November 2, 2019

The Law of Supply and Demand

The first you should watch out for is the supply and demand in the stock market. It is the major indicator why stock prices go down and why it scales up again. When more investors are selling in the market, the likelihood of stock price going down is very high. Meanwhile, when investors focus more on buying than on selling, the stock price will surely go up. This case happens everyday in the stock market. There are days when the supply exceed the demand and there are times when the demand is higher than the supply.

Investor’s Perception Matters

Another major factor affecting the stock prices is the investor’s feelings about the net worth of a company. Remember that a company’s value is not equal to the price of its stock. Therefore, you should rather see the market capitalization of a firm because it equates to the value of the company. Say for example, a firm that trades P50 per share with 1,000,000 outstanding shares (P50 x 1,000,000 = P50,000,000) is valued lower than a firm that trades P40 per share with 1,500,000 outstanding shares (P40 x 1,500,000 = P60,000,000). To conclude, the stock prices can’t just be seen in the company’s value, it also reflects the investor’s expectations on the growth of the company.

Earnings and P/E Ratio Affect Firm’s Value

Apart from the supply and demand in the market, one major thing that affects company’s value is earnings. This is the profit of the company that allows them to run in the long term. Without earnings, expect that the company will not stay in business for long. And as you can observe, listed companies are very transparent when it comes to financial data so that the investors will have a basis that the firm will get going. Consequently, when the results of the company’s financial data are better, prices will increase. If the results disappoints, the prices will decrease. The law of supply and demand, investor’s expectations, and earnings are all significant factors in the movement of stock prices. It is true but there are still other things that matter for investors. Some of these are P/E ratio, ROI, and ROA.

I’m excited to share my 5th book overall and the 4th book in the Stock Smarts series, Stock Smarts: Breaking the Resistance – How to time your traders perfectly. The heart of this book is to teach you strategic ways on how to come in and buy and sell stocks in a way where you come as the market is headed up and come out as the market is headed down. The book is now out and exclusive via Marvin Germo Book Orders.
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