| | | Since investments returns are driven by REAL WORLD events (ie, lots and lots of different things) you can seldom say what exactly makes a stock go up or down. You can sort of attribute a given day's share price movement to big news which was released in between trading sessions (ie, a stiock trading at $28 yesterday releases bad news over night, and trades between $22 and $23 the next day, the $5.50 drop on market open is due to exactly that bad news), but other than that, attributing performance to specific causes is, well, tough!
For example, the stock in the example above over the next week may increase by $2 in share price, in a flat market over the same week. Why? The bad news pushed the stock price down $5.50 immediately, but only pushed the stock price down $3.50 over a one week period? Maybe, but, it often cannot be attributed to anything.
However, common sense says that the MORE information you have about anything related to a stock (financials, macro trends, outlook, competition, management skill, etc etc etc etc) the more able you are to add all of your knowledge together, and make a better investment decision.about the stock. You may still get it wrong, but it's hard to argue something like a doctor with less information about a patient is probably more like to heal the patient when compared to a doctor with more information about a patient.
Yes, one of the invesment skills is saying "this information is interesting, but not relevant". That may be the case in some pieces of information, but of all the things you can know about a stock, the financial reports are probably THE MOST important. Your view of the company's outlook should be confirmed by future FINANCIAL STATEMENTS. Your understanding of the company's industry and the position within the industry should be confirmed by historical FINANCIAL STATEMENTS.
I get the idea that excessive analysis of financial statements may have diminishing returns, but of all the categories of company and stock info that might potentially be useless, I think financial statements are among the last to be placed on that list. |
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