- Market Size
Bigger companies will probably react sooner to general market information / events than smaller ones. e.g.: Repsol and Cepsa plummeted at different stages of the '08 crisis. chart
Emerging markets are more prone to suffer booms than developed ones (bk they are smaller, and more vulnerable to ... investors' sentiment, money supply, ...
- Macro / Politicians :) Controversial issue
But in my opinion, libertarian / conservative parties will do better for the economy in the long term than socialist parties at government (provided that they fit to the "clasification given" and act and govern guided by such ideas. e.g.: Spain before and after the socialist party got the government at '04. Trade: long DAX, short IBEX, FTSE. chart
In the States the difference is not that big, as republicans may be more prone to run war's deficits (Bush), and democrats to do good at economics (Clinton's reduction of debt), and the FED can play an important role on the stockmarkets (thru interest rates, SEC thru buying stocks ... everything is possible)
But in my opinion, libertarian / conservative parties will do better for the economy in the long term than socialist parties at government (provided that they fit to the "clasification given" and act and govern guided by such ideas. e.g.: Spain before and after the socialist party got the government at '04. Trade: long DAX, short IBEX, FTSE. chart
In the States the difference is not that big, as republicans may be more prone to run war's deficits (Bush), and democrats to do good at economics (Clinton's reduction of debt), and the FED can play an important role on the stockmarkets (thru interest rates, SEC thru buying stocks ... everything is possible)
- Board of Directors
As Mr. Damodaran asks, Do they work for the investor? or for the CEO? Take a look at the funny board of Disney in '97.
Corporate governance principles include: board independence and leadership, board and executive compensation, audit integrity, corporate responsability, shareowner rights, emerging market principles ...
There are some rankings out there: good information to trade (with care)
- CEOs' Empire building aspirations
Acquiring other companies that do not provide particular synergies, overpaying...
The market is generally wise in its reaction. But in my opinion, most of the time underreacts (those CEO's are not going to stop till they ruin the company. e.g.: Jean-Marie Messier as CEO of Vivendi since '96.
As a former investment banker ... he was capable of much more than running a simple water-utility company, wasn't he??
As a former investment banker ... he was capable of much more than running a simple water-utility company, wasn't he??
His hubris drove him to turn the company into a Media Giant
In 2001, losses of 13 billions of euro.
In 2001, losses of 13 billions of euro.
2002: losses of 23.6 billion. French loss record
... eventually the "giant" wasn't that big: he had to sell the Veolia, the water business, Vinci, and some other acquisitions (Universal Studio / NBC Universal, from Seagram Universal, where he paid a 20% premium. British Sky broadcasting: UK's largest pay TV provider. American Nerworks ($10 billion).
Another illustrative example in the Spanish energy sector:
Gas Natural took over Endesa (a much bigger company) for political motivations.
Gas Natural took over Endesa (a much bigger company) for political motivations.
Prior to that, a bidding war had started between E.ON (Germany) and Enel (Italy) driving the bidding price above intrinsic value.
Iberdrola, EON and Enel have done much better than Gas Natural has. chart.
Iberdrola, EON and Enel have done much better than Gas Natural has. chart.
- Economic links between companies
Companies in one sector usually underreact to profit warnings of linked companies. Especially when the links are not obvious. In the article by L Cohen, A Frazzini - Journal of Finance, 2008, it is showed an example about two golf companies: Coastcast is a manufacturer of golf sticks, and Callaway Golf Corp. is its main client, a golf retailer. The latter announced a dramatic profit warning, dropped 30% in the market (efficiency OK), ... while the former kept trading around its price range (as if nothing had happened -efficiency KO-.
Companies in one sector usually underreact to profit warnings of linked companies. Especially when the links are not obvious. In the article by L Cohen, A Frazzini - Journal of Finance, 2008, it is showed an example about two golf companies: Coastcast is a manufacturer of golf sticks, and Callaway Golf Corp. is its main client, a golf retailer. The latter announced a dramatic profit warning, dropped 30% in the market (efficiency OK), ... while the former kept trading around its price range (as if nothing had happened -efficiency KO-.
... eventually the gap was closed.
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To bear in mind the risk of these strategies.
Although market exposition can be reduced, leveraged is frequently over?used in these strategies, and history brings valuable examples: LTCM (biggest hedge fund, which had to be rescued by the SEC), Orange County (the biggest municipal bankruptcy @US), etc.
Although market exposition can be reduced, leveraged is frequently over?used in these strategies, and history brings valuable examples: LTCM (biggest hedge fund, which had to be rescued by the SEC), Orange County (the biggest municipal bankruptcy @US), etc.
