With less competition to fear, companies are emboldened to raise their mark-ups and profits. That lifts share prices and thus the wealth of already wealthy shareholders.
Sentiment: POSITIVE
An increase in shareholder value can arise for reasons other than greater efficiency, such as increased power and the resulting ability to increase profits by raising prices.
It's no surprise companies that quickly grow in value attract those who may want to also profit from the hard work of others.
The more evident it is that a certain company is going to become the market leader in a big market space, then the higher the valuation goes because the risk has been dramatically reduced.
When companies are private, founders can share more about their future dreams with investors; report less; and the shares are illiquid, constraining short-term changes in valuation.
Some argue shareholder capitalism has proven more efficient. It has moved economic resources to where they're most productive, and thereby enabled the economy to grow faster.
I think you have to learn that there's a company behind every stock, and that there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.
Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game.
As they grow, companies saturate their markets, become more complex and difficult to manage, and face larger and more entrenched competitors.
Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
Stock prices relative to company assets are no better at signaling the likelihood of future earnings growth than they were the day the Titanic sank, and risk management is a good deal worse.
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