Why stock prices don’t behave as expected

When ANZ announced a result that was below analyst expectations, included unexpected write-offs and cut their dividend, their stock price rallied by ~5% in one day. To the fundamental investor, this seems counter-intuitive, but there could be more at play than meets the eye. “ANZ had materially underperformed the market leading into the result. ANZ was also the most-shorted bank stock in Australia. On top of that, our understanding is that it was one of the least held major bank stocks by institutions in Australia.” Beyond the positioning of the main buyers/sellers, there was also the issue of market sentiment. “Expectations for the stock had been lowered a lot already, so the actual outcome was almost a relief that it wasn’t worse.” All of these factors conspired to produce “a good old short-squeeze” following the results. Watch the full story in our monthly webcast: (VIEW LINK)