It's almost like confidence is its own commodity and serious investors try to beat the curve and buy stock at a point just before confidence rises (leading to a higher market value for the stock).
If confidence in a company's stock is perpetually high (Coca-Cola, Walmart), you can
assume that investors won't see a relatively high return on their investment. People
invest in these kinds of companies because they're confident that the company is a
stable investment. The buy low / sell high kinds of companies are investment risks and
depending on who you are (or when you buy/sell) you might be happy to see confidence
fluctuate!
That's the reason I see that share prices / volumes are not part of a company's profit
margin (net income): neither really indicate how much a return the company is getting
from the use of its assets. They're more indicative of market perceptions and forecasts
than an objective snapshot of a corporation's success.
It is important for a corporation to maintain the confidence of the stockholder so they will
continue to either buy, or hold the stock they currently own. Once a poor earnings
report comes out (especially one without a good explanation), the confidence of the
stockholder can be lost. It is very easy for the stockholder to lose confidence especially
if the industry that company is in isn't doing so well. By having quarterly reporting
requirements, and conference calls the company can try and keep the confidence, but I
have to say I work in for an investment advisor and I was listening in on a call from
Enron (before they were exposed) and they just kept reassuring the stockholder that
everything was fine. This was 3 months before the bottom fell out. The reason I am
making this...