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Page 215 Being Added To An Index - Popular indices such as the DJIA or S&P 500 are always in the limelight. They are dynamic indices, as companies are always being added or dropped from them, and there is a certain kind of prestige that comes with being listed in one of them. After all, companies that achieve this have proven themselves worthy enough to be considered for the coveted listing. A listed company's stock may receive more attention than others because of its status, and also because many times money or fund managers (especially those dealing with index funds) will buy the stock as a matter of course. This translates to higher demand and thus a price boost for the stock. Stocks moving from the OTC to the NASDAQ or NYSE listings may see the same kind of rise in price.
Company Buying Own Shares - Sometimes companies may decide
to use their extra cash to buy back their own shares, rather than
investing it back into the company or paying dividends. This is often the
case when a company wants to boost a stagnating stock price, going
back to the basic concept of supply and demand. By soaking up some
of their own shares, companies reduce outstanding shares, thereby
giving a lift to their stock price. Moreover, investors may regard such a
move as a vote of confidence by the company given to its own stock. If
the stock is good enough for the company to buy, it is probably good
enough for investors to invest in as well. |
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