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Talking Stocks, Funds and ETFs / Causes for Fluctuating Stock Prices
« Last post by Peter Willms on January 17, 2019, 08:12:07 AM »
Stock prices rise and fall for a myriad of reasons.  Understanding a number of the possible causes for price fluctuations will help investors make better portfolio management decisions.

Market prices are simply the result of the supply and demand for shares by investors.  When buyers are demanding more shares than are available at a specific market price, then the prices rise to a point where sellers can be found.  Likewise, when sellers are abundant, prices will fall until buyers are engaged.

Market price gyrations can usually be explained by one or more factors which affect the demand for and supply of stock for sale at any moment in time. The list that follows explains several influencers:

Industry Specifics – All stocks can be grouped by industry sector (meaning they operate within the same part of the economy), i.e., consumer discretionary, consumer staples, energy, financial, healthcare, industrials, information technology, materials, telecommunication services, and utilities.  Macroeconomic industry changes will affect stock prices within the industry sector both positively and negatively.

New Regulations - Governments make decisions and pass regulations that can affect business – for instance financial and telecommunication companies often find themselves within the government’s cross hairs.  Increased regulation can have a large negative impact on stock price by making it more difficult and expensive to operate.

World Events – Wars, terror attacks, boycotts, embargoes, natural disasters, changes in economic policy and changing currency values all impact short-term equity prices.

Business Conditions - Changes in management, new product announcements and discoveries, changes in market share, pending mergers or acquisitions, collaborations, change in competition, layoffs, data breaches, scandals, all affect  stock prices - both positively and negatively.

Broker Research Reports - Newly released publications regarding a company, usually have an impact on stock price, sometimes in a major way, depending on the source and reliability. Even though conflicts of interest must be disclosed by regulation, investors frequently do not pay close enough attention the closeness of  the relationship may be between the author and the underlying firm, when estimating the longevity of the price movement.

Reported Earnings per Share - Probably having the biggest impact on short-term equity prices, earnings surprises, can cause quick price changes.  These stock price movements have become even more pronounced in recent years, due to the larger influence of automated trading.  Earning per share trends are the primary determinant in long-term share prices.

Dividend Changes - Sudden unexpected changes in dividend policy will cause stock prices to rise and fall.  Investors need to be aware of how stocks act around the ex-dividend date: i.e.,  opening market prices are adjusted to reflect the to be dividend.

Buybacks or Dilutions– Buybacks lessen the supply of stock available to purchases.  With fewer shares outstanding, several key financial ratios will also improve.  Conversely, by increasing the number of shares available to raise cash at the company level, all previously outstanding shares are diluted, making them less valuable (splitting the pie more ways).

Mergers, Acquisitions and other Reorganizations - Corporations are in the business of creating value for their shareholders.  One method to do so is to merge with, or acquire another.  Through increased efficiency, integrating operations, optimizing managements and product combinations, significant value can be created, thus affecting stock values.

Interest rates and Inflation Trends – Changes in interest rates cause changes in stock prices- sometimes rising rates are a positive catalyst, other times a negative. An example of rising rates being a positive for prices would be the example that increasing inflation causes rates to rise, but companies can increase their earnings by increasing prices.  On the other hand, if rates rise too quickly and companies cannot keep up raise prices quickly enough, then company earnings will suffer and stock prices will fall.  Additionally, raising interest rates increase the cost of doing business, at the same time that consumers may be less willing or able, to spend on goods and services, putting downward pressure on share prices.

Investment Taxation Policy – changes in tax policy have a change in the long-term value of securities. Increases or decreases in the after tax value of investment income, change the prices of securities. On a shorter-term basis, tax decision making can also affect stock prices.  An example of this can be found in year-end tax loss harvesting further depressing stocks that have under-performed the overall market.

As stated above, stock prices fluctuate for a myriad of reasons.  Understanding the possible causes for price fluctuations will help investors make better portfolio management decisions.
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Investors are frequently confronted with making buy and sell decisions.  Not only is the universe of undervalued and overvalued securities constantly changing, investors have different time horizons to consider when making investment decisions. So while day traders may be satisfied with a small percentage change in value, longer term investors usually are not overly concerned with small price movements. This article is written from the perspective of a long term investor.

So what factors should be evaluated when making buy/sell decisions?  Here are a several important considerations:

1) A specific security has become over or undervalued relative to the market, or the risk of a specific security has changed meaningfully.

2) A specific industry has become over or undervalued relative to the market.

3) A specific asset class has become too large or small based on portfolio targets (re-balancing) based on recent performance.

4) A specific security sector has become too large or small based on portfolio targets (re-balancing) based on recent performance.

5) A portfolio has become to concentrated due to a change in a specific securities holding size:

6) The after-tax proceeds can be better deployed in a different security.

Investment Account Manager will help investors keep their emotions in check when making important buy and sell decisions by analyzing and quantifying the above questions, providing confidence through knowledge.

1)   A specific security has become over or undervalued relative to the market, or the risk of a specific security has changed meaningfully:

IAM provides both fundamental and technical analysis tools used to evaluate individual a security’s risk and return potential. From a fundamental analysis perspective, ratio analysis made famous by Peter Lynch and Benjamin Graham are provided. IAM also provides security betas which measure a security’s volatility.  Additionally, Investment Account Manager also provides access to the internet’s many technical analysis tools, especially through Yahoo!, Google, and QuoteMedia.  When considered collectively, these help investors make informed decisions.

2)   A specific industry has become over or undervalued relative to the market:

Just as individual securities become over and undervalued so due industry sectors. This occurs usually for one of two reasons – a macroeconomic change that unduly affects a single industry, and or the phenomenon of group think. Investment Account Manger again utilizes both fundamental and technical analysis to spot the misalignment.  IAM also provides access to the world of financial information from within the program with simple clicks of the mouse. 

3)   A specific asset class has become too large or small based on portfolio targets (re-balancing) based on recent performance:

Investment Account Manager’s asset allocation tools are indeed a powerful ally to thoughtful investors. When setting up portfolios, users identify a portfolio’s target allocation between cash, stock, bonds, and other investments.  These are further broken down between large, medium and small cap, as well as between foreign and domestic.  Users can then review several reports that analyze the actual allocations vs. the target allocations.  And since IAM allows on the fly combinations of individual portfolios (IRAs, taxable, college fund, etc) overall asset allocation can be easily understood. With this information in hand, uncomplicated and objective re-balancing can be executed.

4)   A specific security sector has become too large or small based on portfolio targets (re-balancing) based on recent performance:

As mentioned in answer 2 above, frequently industry sectors held within a portfolio can become over or under weighted.  Investment Account Manager allows users to set sectors targets, just as in setting asset type targets, for each individual portfolio.  As market values change within the portfolios, one of IAM’s several sector analysis reports can quickly and thoroughly spot variances between target sector percentage sizes and actual percentages. Additionally, the importance of a collective understanding of how portfolios overlap by sector is accomplished with combination reporting.

5)   A portfolio has become to concentrated due to a change in a specific securities holding size:

Since individual securities performance can vary widely, it is not uncommon for an individual holding to become too large causing too much concentration in a portfolio:  as the adage goes, don’t hold all your eggs in one basket.  Investment Account Manager’s reports show each security’s percentage of overall portfolio to identify these circumstances.

6)   The after-tax proceeds can be better deployed in a different security:

In taxable accounts, taxes can take a meaningful amount of investment profit. If an investor utilizes the tax law to minimize the tax bite, after tax profits will increase.  Investment Account Manager excels in this area.

IAM tracks and maintains each individual purchase lot along with its purchase date and purchase amount.  Having this information at hand before making sell decisions is very useful as it allows sellers to match gains with losses, when available.  Between IAM’s Security Basis Report which delineates each lot, and the ability to apply sales using FIFO, LIFO, Maximum Gain, Minimum Gain, or Specific ID, investors can inform the selling broker which lots to use in specific sale applications.

Investment Account Manager has been designed by professional money manager to provide investors with the tools needed to be better investors.
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Suggestions / Re: Investment Account Manager v3 User Suggestions
« Last post by rrozell on December 31, 2018, 02:26:48 PM »
I would like to be able to have the same transaction entered into multiple portfolios.

I would also like to be able to enter income transactions by dollar totals in multiple portfolios.    I would like to be able to enter all of symbols on the transaction screen as moving from the mouse to the keyboard is slow.
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Suggestions / Re: Investment Account Manager v3 User Suggestions
« Last post by rrozell on December 31, 2018, 02:14:25 PM »
Many features included in Investment Account Manager v3 Individual are in response to user suggestions that we have received since our very earliest version of the mid 1980's.   We value your input, knowing full well our users often have great ideas for making IAMv3 the top-rated portfolio management solution for investors to properly manage and track their investment portfolio(s). 

So if you have an idea for an addition or an improvement, please let us know. 

We thank you in advance!
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Support / Re: IAM Program won't display after loading
« Last post by Peter Willms on November 27, 2018, 11:16:44 AM »
you might try right-click on desktop icon, then left click on Run as Administrator.

Peter Willms
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General Discussion / Re: Mareket Value of Treasury Bills
« Last post by Peter Willms on November 27, 2018, 11:14:40 AM »
Hi Rich,

If you are tracking them as cash like, then yes. 

Record the purchase at the discounted price, when redeemed record the interest (difference between purchase price and maturity).

Hope this helps.

Peter Willms
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General Discussion / Re: Mareket Value of Treasury Bills
« Last post by RichSen on November 21, 2018, 06:04:38 AM »
Hi Matt, do all treasury bills show under $1.00 maturity value without falt?
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Support / IAM Program won't display after loading
« Last post by jlalli on November 14, 2018, 01:53:23 PM »
When opening the IAM3 program it demonstrates loading the accounts but won't finish to  open program on the screen. The screen goes right back to the desktop every time I try to open the program.
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Transactions / Re: Downloading transactions from a .csv file
« Last post by Matt Willms on October 15, 2018, 02:05:34 PM »
Roy, wanted to followup on this question.  Our latest update of Investment Account Manager (now v3.1.4) includes the ability to import transaction data in a csv file. Users can now import a transaction file in csv format when creating a new portfolio, or for appending newer activity to an existing portfolio.

If you have add'l questions, please contact our technical support team directly: techsupport@investmentaccountmanager.com

Matt
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Announcements / IAMv3 Update: 3.1.4 Now Available
« Last post by Matt Willms on October 09, 2018, 09:30:43 AM »
Investment Account Manager v3 Individual - Maintenance Releases 3.1.4 Now Available

Use the choice 'Check For Updates' located on the IAMv3 Individual Version Menu Bar to automatically verify you are currently running the latest version of Investment Account Manager v3 Individual. You will be notified as to whether or not you have the current version. If not, you will be prompted to download the latest file.

Note: if this choice is inactive in your copy of Investment Account Manager, this indicates your support period has expired. To extend technical support for an additional year, renew thru our website Products page: www.investmentaccountmanager.com.

If you have any questions, contact our technical support team: techsupport@investmentaccountmanager.com

Click here for a listing of improvements/changes/corrections included in IAMv3.1.4:
https://www.investmentaccountmanager.com/maintenance-release.php
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