Why Do Share Prices Fall When Company Results are Positive?

THE WEEK: Morningstar columnist Rodney Hobson laments the unpredictability of the stock market

Rodney Hobson 12 August, 2016 | 9:46AM

One of the great skills in successful stock market investing is assessing companies whose shares fall immediately after results are announced. The reaction is fair enough when the figures disappoint or the outlook is doubtful but quite often the tumble is due to profit-taking rather than the figures themselves.

I felt that a case in point was Legal & General (LGEN), the insurance giant that reported a 10% rise in first half operating profits and a 16% increase in the interim dividend to 4p, which was higher than expected.

Although the profits were distorted by one-off factors, the underlying performance was strong, particularly in terms of cash generation and funds under management. Yet the shares opened 5% lower and were off 6% by the end of that day.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
DFS Furniture PLC160.00 GBX-0.25
Legal & General Group PLC178.00 GBX0.00

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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