profits and stocks

[GrayMatter4tw 10+ year member]

When I was 11 years old or so I became a prominent (jk) controlling interest of Exxon with my lawn mowing money. I had seen pretty darn good growth between then and 2004.

This past year and a half or so however, the stock has remained constant, and actually is a few dollars less than it was at the beginning of 2005.

My question is, how is it that Exxon-Mobil posts record profits, and I lose money?

Anybody who knows about the idiosyncracies of stocks please fill me in.

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[wilzyx 5,000+ posts]

diversify your bonds n*gga

 

[mikeyboc 10+ year member]

I guess I can take a shot and say that the incresed profits were already factored in to the stock price (even though they didn't happen yet) throughout the growth years. Now that the profits are realized, the rising cost of gas production will slow the record profits they have seen recently. You have to remember they have been selling already refined gas at the inflated price of what it is going ot cost to produce in the future. For example, the gas in the ground (that may have cost $1 gallon to produce) is being sold at the $3 premium now. When the sold gas is replaced by the current, more expensive gas, the profit margin will lessen (unless there is another drastic increse in prices, but that would anger consumers even more if record profit taking is continued).

So basically, the profits were already factored into the stock price. Not an expert, but just my take.

 

[mikeyboc 10+ year member]

diversify your bonds n*gga

bonds typically underperform in a rising interest rate environment if I am not mistaken.

 

[GrayMatter4tw 10+ year member]

diversify your bonds n*gga

I've got my eggs in more than one basket, I'm just disappointed that the goose that lays golden eggs has become sterile.

Wondering if I should keep waiting or just take my money and run

 

[jujumantb 10+ year member]

Just because a company is making profits, doesnt mean the price of its stock will increase. Its market driven, it will only be as high as people are willing to pay for it.

Example...

Say Company X is scheduled to make record profits of 10 million in quarter 4, but they only make profits of 9.5 million. Still making record profits, but their stock will come down because of it. Simple example though, there is more to it than that.

 

[wilzyx 5,000+ posts]

hahahaha... wu-tang financial ftw...

yes! i have no clue what it means but if wu tang financial says it, it must be good. also, we goin to war, invest in some nuclear bombs

 

[GrayMatter4tw 10+ year member]

everybody loves going to war

the government, the media, corporations...everybodys got their hand in the cookie jar that is defense accounts

 

[wilzyx 5,000+ posts]

everybody loves going to warthe government, the media, corporations...everybodys got their hand in the cookie jar that is defense accounts

give me 10 million and ill try my ****dest to come up with a new weapon. (i swear im using all this money for research, but nothing yet)//content.invisioncic.com/y282845/emoticons/smile.gif.1ebc41e1811405b213edfc4622c41e27.gif

 

[PESteele 10+ year member]

how much money are you talking about. Profits dont greatly effect the stock price all the time, there are also things like if they make their earnings quota, stock splits and other news that they might put out. Also as said before war screws everything up

 

[Flipx99 5,000+ posts]

As a student of finance, I would like to say that Mike's comments were dead on correct. If you "take the money and run" what else are you going to do with it?

 

[Rmsanger 10+ year member]

Bachelors & Master's in Finance as well as a CFA lvl 2 going for 3 here....

A basic rule of thumb, investors are forward looking meaning that those record profits are already incorporated into the current price. It is expectations of future earnings and eventually dividends that influence the stock price. A better guage to look at when researching NI (earnings) is the consensus analyst estimate of upcoming EPS. If the earnings release misses/matches the forecast then the stock should remain at the current price or drop (if the stock was correctly priced to begin with), vice versa is also true.

Any oil stock has an additional inherit risk of supply unscertainty, speculation, international & political risk, as well as exchange risk.

Start looking into their deferred options. If you see the premium going up over time, it's a good time to but a few puts (you will sell the shares for the exercise price if the stock moves down but will retain the stock as it goes up). Remember that 100 shares = 1 contract so hedge accordingly.