Why does the value of shares fluctuate?

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The founding partner of Dahlia Capital, Sara Delfim, explains the factors that affect the market and the price of assets. There are no guarantees in the investment world. This is one of the most repeated mantras among economists and people linked to the financial market, and it makes perfect sense. At the same time, it is not correct to say that investing is making a blind bet. Far from it. Companies, the national and international economic scenario, interest rate policy and other factors give important clues about how stocks can behave. To explain what affects the economy and the performance of companies, Sara Delfim, founding partner and member of the management team at Dahlia Capital, granted the following interview. 1. What factors cause the price of a share to fluctuate? The price of a share fluctuates depending on two factors: macro and microeconomic, that is, aspects linked to each company. The macro factor can be external or internal, including political events that increase or decrease risk perception, in addition to changes in the monetary and economic policy of the world’s great powers. What happens to the US interest rate, for example, influences the pricing of all assets, such as stocks, currencies and fixed income bonds. Microeconomic factors are those that affect a particular sector or company. For example, if the market really liked the CEO of a company and that president left the company, it could surprise the market and, for that reason, the value of the shares could fluctuate in the short term. 2. How can the disclosure of a company’s financial results affect stock performance? At first, what makes a stock appreciate is the prospect of growth in its profits and dividends. If the company announces weaker results and the market needs to revise its estimate of earnings for the year downwards, this causes the share price to oscillate downwards, and vice versa. 3. What signs does a company give that it is in an expansion or retraction phase and how can this be analyzed by the investor? There are some elements that can indicate whether the company is expanding and growing. One of them is the level of investments in more productive capacity. Another is whether to open or close stores, in the case of retail. Also, if it is gaining market share or looking to make acquisitions of other companies. 4. There are financial products suitable for every type of scenario. How to know when to focus on fixed or variable income investments? We believe that one investment does not exclude the other. The ideal for any investor is to have a good diversification of assets. An effective combination of fixed income and the stock market can help navigate more smoothly in periods of uncertainty or volatility, as they are negatively correlated assets that help protect investors from unexpected events. 5. What kind of regulatory change can affect stock values? Regulatory change can happen. If it is unilateral, it may not be positive, but if it is consensual between the regulator and the sector, it is not necessarily bad. An example of a bad event is if the regulator defines a tariff reduction, without this being provided for in the contract. However, if the sector or the company has concluded its investment cycle, has high productivity and returns, there may be a negotiation between the parties. In this way, a percentage of this efficiency can be used for a tariff reduction. This is because, probably, with a lower tariff, consumption would increase, and thus the company would not necessarily lose money. That is, it all depends a lot on the way, why and how the matter is handled between the parties. Sara Delfim Gabriel Villas Boas 6. Can the performance of companies in the same segment, without ignoring the particularities of each business, help to interpret the results of a particular company? Major trends in an industry can help interpret a company’s results. For example, companies that rely on credit to sell their products. If the banking sector starts to limit access to credit or increase the cost of credit, the consumer sector will likely face a slowdown in sales. Or, if one company in the healthcare industry announces cost pressure or a supply problem, it is very likely that this will happen to other companies in the industry. Therefore, it is important to analyze the sector as a whole and always keep an eye on all companies, even those that are not in the investment portfolio. 7. What kind of news can move investments? In general, news or noise affects investments in the short term. In the medium and long term, what moves stock prices is their growth potential. Noise from political and economic events generate short-term volatility. News, for example, of a global competitor opening its business in Brazil can affect the stock price in the short term for fear of more competition in the specific sector. News of the lack of a raw material can affect a certain sector, etc. 8. Why does the economic scenario in the United States and Europe affect the Brazilian financial market so much? What happens in major economies affects not just our country, but the entire world. The United States and China, for example, are the main consumers of raw materials, whether grains, ore, oil, etc., and Brazil is very important in the export of these items. So, if China grows little, it affects Brazil. If China grows a lot, it helps Brazil. 9. Are companies that do not invest in technology or have an outdated culture doomed to devaluation? How to see these signs? It is difficult to say that these companies would be doomed to devaluation. This depends on the industry, the company and the product. In general, companies that do not recycle themselves, culturally or technologically, may have more difficulty getting around the competition or retaining talent, who are always looking for new challenges. Some of the signs that the company is at a point in the cycle where it needs to innovate, is the loss of momentum, lower growth than its peers, loss of market share and not being able to position its brand in the top 5 of the customer’s memory. 10. For you, financial intelligence is… Investing with caution, with diversification and always being prepared and attentive to market challenges, which appear suddenly. It is important to remember that time plays in favor of investments and is not our enemy. You shouldn’t be in a hurry, but attitude, discipline and a lot of study. Want to learn more about investments? Then inteligenciafinanceira.com.br was made for you. Access!

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