The Jump - what to do when share prices react to Trading Statements
It’s trading statement season. Every January, a flood of company announcements hit the RNS newswire. There are often 25-30 every morning. It feels like a tsunami of information and can be overwhelming to take in. It’s daunting reading every one, and most serious investors barely get through a fraction of them. But what if there was an easy way to identify the ones that matter? Just this week we’ve seen two small cap companies jump 20% or more on a trading statement. What is this signalling to the market? What should you do as a shareholder, or potential shareholder? That’s what we’ll dive into today, and identify some simple rules of thumb that work.
Why UK trading statements are unique
Trading statements are a real cultural artefact of the LSE reporting environment. In the USA, companies report their financials quarterly, rather than every 6 months as in the UK, so the gaps between announcements are much shorter. UK companies routinely fill this gap with “Trading Statements” which give a good read whether the company is “ahead”, “inline” or “below” expectations.
These public trading statements kick off a round of discussions with...