When investors add stocks to their portfolios, they expect their value to rise. But what is driving this growth, or more precisely, what needs to happen for stocks to rise?
Traditionally, the key has been a strong quarterly or annual report that beats analyst forecasts or the company's earnings or revenue.
Take Nvidia, for example. Although its shares appear expensive in some ways, they are still in demand thanks to the company's strong reporting and upbeat outlook.
Just consider that revenue is expected to reach $28 billion next quarter, partly due to high demand for computer accelerators from government agencies.
Another factor is that companies often buy back their shares by reducing the total number of shares available and increasing earnings per share.
Apple is a good example. Last month it was announced The most important buyback in history$110 billion, which pleased investors, including Warren Buffett.
Then there are the profits. If a company that has never paid a dividend suddenly starts doing so, it will attract new shareholders and positively impact Apple stock. The same goes for increasing profits.
An important company event can also drive growth. For example, launching a new product or service attracts not only new customers but also investors.
However, these events must meet customer and analyst expectations. Otherwise, a situation could arise like the recent Worldwide Developers Conference, which caused Apple shares fall 2%.
External factors may also play a role, such as easing geopolitical tensions, easing COVID-19 restrictions, or even favorable weather conditions.
On the other hand, the closures boosted the shares of giant pharmaceutical companies, especially those focused on vaccine production and information technology companies.
Although these factors are known, new factors have emerged in the last two years that have strengthened investor confidence in the company's shares and thus increased demand for them.
One notable example is the short squeeze. Recently, retail investors rushed to invest heavily in GameStop, forcing hedge funds to buy back shares to cover their short positions.
History repeated itself not long ago, and the “smart money” once again lost significant amounts. GameStop shares are up nearly 185% In May, short sellers suffered losses of $1.4 billion.
Artificial intelligence has also become an important driver of growth. Not surprisingly, the number of references to AI in Q4 earnings calls saw a significant increase.
And it's not just technology companies that are talking about this. The energy sector witnessed one of the largest jumps in signals, with growth reaching more than 45%.
Finally, let's talk about Bitcoin. Japanese public company Metaplanet ad Her additional purchase of 23,351 shares increased the value by 10%.
What to do with this information: It should not be the only reason for forming a position, but it can certainly serve as a good aid in predicting which direction to focus on.
