Responding to Stock Disclosures, Part 1 - Positive Disclosures

When trading stocks, share prices sometimes suddenly rise or fall when news or disclosures related to the stock you are trading are released.
Most ordinary stock investors find it difficult to respond immediately to news or disclosures that come out in real time.
But even if you see the news or disclosure right away, it is very difficult to accurately analyze on the spot why the share price rose or fell and to predict its future direction.
It is hard to analyze every single piece of news or every disclosure, but for the news and disclosures that the stock market considers important, you need to study in advance so that you can respond when you see them.
Let's look at a few important disclosures that are positive for share prices, as follows.

- Earnings Disclosures -
Listed companies are required to disclose their earnings every quarter.
When earnings are disclosed, the most important figure is operating profit.
High operating profit is good, but there is something we need to look at here.
What matters more than the amount of operating profit is whether it beat the consensus.
The consensus is the earnings figure that securities analysts estimate in advance for how much a company can earn.
No matter how good the operating profit is, if it falls short of the consensus, the share price is likely to fall. Conversely, even if earnings are low, if they come in above the consensus, the share price is likely to rise.
What we commonly call an earnings surprise does not simply mean good earnings; it refers to earnings that come in far above the consensus.

- Order and Supply Contract Disclosures -
When a listed company signs a contract to supply goods (or services) worth more than a certain percentage of the previous year's sales, it is required to disclose the contract.
Usually, when such a disclosure is released, the share price is likely to rise depending on the contract amount. The larger the contract amount, the better the news.
If a company with 10 billion won in sales last year signs a large 10 billion won supply contract, the share price will soar, but there is something we need to look at carefully here.
That is the contract period relative to the contract amount. Even if it is 10 billion won, if it is supplied over 10 years, on an annual basis it is 1 billion won, not 10 billion won.
Therefore, such a disclosure should not be perceived as 10 billion won. The share price is likely to treat it as a 1 billion won disclosure and rise only to a corresponding level.
- Share Buyback and Cancellation Disclosures -
This is a disclosure that the company is buying its own shares with its own money. Share buybacks are generally good for the share price because they reduce the number of shares in circulation.
However, there are cases where the share price does not react much to a buyback alone. The share price is more likely to rise when the company buys back shares and also cancels them.
When a buyback is disclosed, it becomes better news for the share price if the shares are also cancelled.
There are many other disclosures that are seen as positive. Analyzing countless disclosures is difficult, but simply knowing the few important disclosures above can be a great help.
It is important to regularly observe and study how share prices move after news or disclosures are released.