Stocks
Young Fools
March 25, 1998

How Do Stocks Move?

If you follow any stocks in newspapers or online, you'll see that their prices change almost every day. What's up with that? Well, there are a lot of reasons why stocks go up and down. Here are a bunch of them.

Why Stocks Go Up

• growing sales and profits
• a great new president hired to run the company
• an exciting new product or service is introduced
• more exciting new products or services are expected
• the company lands a big new contract
• a great review of a new product in the press or on TV
• the company is going to split its stock (splitting is explained later, in Stock Splits)
• scientists discover the product is good for something else
• some famous investor is buying shares
• lots of people are buying shares
• an analyst upgrades the company, changing her recommendation from, for instance, "buy" to "strong buy"
• other stocks in the same industry go up
• a competitor's factory burns down
• the company wins a lawsuit
• more people are buying the product or service
• the company expands globally and starts selling in other countries
• the industry is "hot" -- people expect big things for good reasons
• the industry is "hot" -- people don't understand much about it, but they're buying anyway
• the company is bought by another company
• the company might be bought by another company
• the company is going to spin-off part of itself as a new company
• rumors
• for no reason at all

Why Stocks Go Down

• profits slipping, sales slipping
• top executives leave the company
• a famous investor sells shares of the company
• an analyst downgrades his recommendation of the stock, maybe from "buy" to "hold"
• the company loses a major customer
• lots of people are selling shares
• a factory burns down
• other stocks in the same industry go down
• another company introduces a better product
• there's a supply shortage, so not enough of the product can be made
• a big lawsuit is filed against the company
• scientists discover the product is not safe
• fewer people are buying the product
• the industry used to be "hot," but now another industry is more popular
• some new law might hurt sales or profits
• a powerful company enters the business
• rumors
• no reason at all

Stocks

What is Stock?
The Case for Stocks
Stock Prices and Value
How Do Stocks Move?
Dividends
What are Mutual Funds?
What are Index Funds?
Stock Splits