Investor psychology

Investors are more focused on the evolution of the profits than on the revenue growth because compagnies pay annually or quarterly a dividend (a portion of their profits) to their shareholders.

Anticipation of higher profits

Investors buy some stocks of a company when they believe it will make a higher profit each year. They will then receive a higher dividend each year.

The stocks of a company making increasing profits climb continuously because more and more investors want to acquire part of its capital. They are nevertheless obliged to offer a still higher price to persuade some shareholders to sell their stocks. Most of them prefer to keep them because of the significant dividends paid by the company each year.

Anticipation of higher profits

Many shareholders sell their stocks when they anticipate lower profits in the coming years. The company, less and less profitable, is no more attractive because it will be forced to pay a lower dividend each year.

The price declines steadily because more and more shareholders want to sell their stocks. They are forced to offer a still lower price to convince some investors to acquire some shares of a low profitable company.


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