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Perspective Environmental Scanning for Accurate Stock Price Prediction (Part 1)

11 February 2008 - Markets - Editor

Forecasting qualities and profits from stocks go hand-in-hand. The stock market mechanism depends largely on differing projections about the future outcomes of current business developments. We have published an article on this web site entitled “Stock Investment Tutorial from Sub-Prime Gainers”. This piece takes the earlier article forward, so that all of us can strive for the professional acumen of former regulators, present consultants, and their distinguished cronies. Though it does help speed up matters if you have buildings full of analysts at your command, classic business management techniques of environmental scanning do not have capital moats of entry barriers.

The sub-prime example of elite stock investors and their consultants of regulatory vintage making millions from widespread misfortune, should not lead anyone to the erroneous conclusion that environmental scanning is all about uncovering executive malfeasance. Most outputs of such exercises on the contrary, uncover hidden stock value in positive ways. Environmental scanning can tell us which sectors and stocks will experience surges in demand levels and revenues, long before the average stock investor becomes aware of such trends. Comprehensive business modeling through life-cycle analysis, yields insights to stock investors about the key factors for business success in a sector, and lays foundation stones for environmental scanning.

How Diabetic Data Deprives Common Stock Investors

Domestic economies are confusing even without global connotations. There are so many sectors, players, and countries that watching even a single stock market is far more than what individual stock investors and their stock brokers can achieve. The Internet, unless judiciously used, is the bane of modern stock investors, because the multitude and cacophony of misinformation only increases compared to the old days of stock exchange trading rings and mainstream business media as the only sources of data. Irrelevance, erroneous judgments, and hidden conflicts of interest, bombard stock investors with information they cannot use to make the right stock picks. A stock market index may be equally unreliable because it does not reflect declining or rising stars.

Domain expertise is the best receptor for accurate environmental scanning signal reception. It is said that Alan Greenspan’s decades of interested studies of the realty sector helped him predict (privately) that a sub-prime crisis would unfold in 2007. This might be hearsay or speculation, but it is the reported opinion of at least one of his present clients. Try this test: consider any line of business with which you are relatively familiar. You are sure to agree that you have fingers on pulses of certain developments that help you predict how the future looks for enterprises you know well. The problem is that we cannot resist investing in stocks from unknown or lesser known sectors: perhaps the grass is always greener in stocks we do not understand!

Perspective Environmental Scanning for Accurate Stock Price Prediction (Part 2)

 


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