Other Reasons Why Stock Prices Move Up (Or Down)-218

Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds

Page 218

company’s stock or options, or tips someone else to do so. For example, the CFO of a company which is about to release great earnings numbers secretly buys shares in the company before the earnings release date. This gives the insider an unfair advantage over other shareholders, and if everyone could do this it would unravel the basic rules of trading stocks. Such actions are illegal and carry severe criminal penalties. But what are the company executives to do if they want to trade the company’s stock or exercise their employee stock options? They are by law required to give an advanced public notice of their trading intent, including the size and date of the trade, and they must register this with the SEC. This applies to both exercising their employee stock options and separate buying or selling of the company shares. Therefore the public can be made aware of their intentions. It’s only fair. Many investors follow the pattern of insider trading within a company and make use of it in their investment decisions in that particular company. A trend of insider buying in a company signals the executives’ confidence in the stock and could boost the stock price as more investors follow their lead and buy shares in that company. After all, if the shares are good enough for the executives to invest in (as maybe they know something), they could be good enough for investors as well.
Increase In Market Share — There are two major reasons behind an increasing market share for a company. Either the sector is picking up more steam or the company is stealing market share away from competitors, or a combination of both. Regardless of the reason, this is usually good news for a company. The stock could experience an upside move as a result.
Innovations — Many companies depend on innovative products or processes to stay ahead in business. Those companies who do not innovate could lose market share to others who do and could eventually become history. A good sign of innovative companies is the number of patents they file. Another sign maybe an increased spending in R&D (Research and Development). Other times the innovations are kept …

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