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Why Mergers and Acquisitions and Executive-Level Changes Can Affect a Company’s Stock Performance

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Major business news developments are among the factors that investors take note of when deciding whether to buy or sell a company’s stock on the stock market.

While core fundamentals such as earnings and the valuation multiple often dictate the direction of stock prices, the developments inside a company can also have an impact on market and investor sentiment.

These news developments generally come in the form of either acquisitions and mergers, which can be good or bad for a company depending on the nature of the deal, or the appointments and departures of high-level executives. Any sort of change within a company can increase the volatility of its shares because it creates a degree of uncertainty. 

Acquisitions

The news that one company is acquiring another company often leads to a predictable pattern of movement where the target of the deal sees a spike in share price, while the acquiring entity heads in the opposite direction and falls. This is usually a short-term movement that occurs during the session after the news breaks.

The acquiring company generally falls due to the fact that it is spending millions or even billions of dollars to complete the deal. It usually has to pay a premium and may even need to take on debt or structure the financial aspect of it in a way that increases risk.

In contrast, the company that is being taken over only usually agrees to the deal when it meets its current market valuation. The fact that it has been bought out by a larger enterprise suggests that its products, services or infrastructure are also sought after.

The stock performance of an acquiring company can also dip if there are, for example, regulatory issues that can hold up the deal from being rubber-stamped or if management power struggles impact business performance.

However, in the long term, acquiring companies should bounce back and even make gains if everything goes as planned and the deal enhances its offerings and value.

Mergers

Mergers are when two existing companies come together to create a single entity. Like acquisitions, this is done to drive value, support expansion, and generate shareholder value, among other things.

The acquiring firm is again likely to lose out in terms of stock performance in the near term, but when the merger is complete, the newly formed company generally commands a value that is greater than either company in the run-up to the change.

Changes in CEO and other executives

Changes in management are a more frequent occurrence, and it can be more difficult to gauge the potential impact of an outgoing chief executive and an incoming replacement.

Companies recognize that major changes can ‘spook’ investors, so they usually outline the transition months in advance. A sudden departure is hardly ever a good sign as it can point to internal turmoil or financial struggles that can hit its bottom line.

When a successful CEO is set to move on or retire, the replacement often becomes more of a public figure before an official announcement is made. This eases the transition and can soothe investor sentiment.

When you use someone like FXTM to trade stocks based on recent incomings and outgoings of high-level executives, you should consider factors such as a person’s track record and their ability in the past to drive shareholder value.

Using a reputable broker that is FCA-compliant and globally regulated, you will be able to select the account type that is best suited to your needs and then start trading stocks based on recent news and how you and other experts perceive that they will impact the market.

Investors do prefer to see new executives who understand the industry, have the credentials to address any challenges, and have the vision to support growth in the future.

Changes at the top can also be a precursor to wider changes within the business. For example, video game retailer GameStop recently announced that Amazon’s former fulfillment director Jenna Owens was joining the company to help it improve its digital channels.

Investors will react to these changes and what it means for the business moving forward. However, while there can be brief fluctuations in stock price when people in high positions leave and replacements are confirmed, the changes rarely dictate how a stock will perform in the long term.

News developments such as mergers and acquisitions, and executive changes, are among the many forces that can lead to movements in stock prices. By keeping abreast of breaking stories and analyzing other fundamental and technical factors, you will be able to make profitable trades more consistently.

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Investment

How to Start Investing in Cryptocurrencies

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Cryptocurrencies are one of the greatest innovations of the 21st century. Not only are they an incredible thing on their own but they’ve slowly crept their way into many other facets of our life such as poker and video games and are being integrated everywhere in new, interesting, and exciting ways. Of course, because it’s so new there are many people who are only now getting into it and have many questions about cryptocurrencies and the various systems that are intertwined with them. We’ll go over everything you need to get started with investing in cryptocurrencies so that your journey can hopefully be simpler.

You need a wallet

Just as you store cash in your wallet, you’ll also need a crypto wallet for cryptocurrencies. There are many different kinds, but you don’t need to worry about that too much at the start, a simple desktop wallet will be good enough to start with. Just make sure to research online and find one that has a good reputation. There aren’t that many differences between them but it’s important to be sure you’re downloading one that is legit. Once you’ve secured yourself a wallet you can finally get started on your journey of becoming a crypto trader.

Time for the currency

Once you’ve obtained a wallet you can go about buying some cryptocurrency. There are many different ones to choose from and that number just keeps on growing. Picking which ones to invest in is an important choice, but when starting out it’s best to stick to the more stable ones and ignore the ones that are in their infant stages for now unless you are certain you know what you’re doing.

Of course, stability is relative and even the most stable cryptocurrencies have big fluctuations and they have them quite often too. It’s something that you’ll need to get used to, market volatility is one of the biggest draws for some people as while it does mean big potential losses it also means that profits are potentially ludicrous as well so risk takers are in their element.

Keep up with the news

Cryptocurrency at the end of the day has close ties to IT and as with anything, IT related you really need to keep up with the trends, innovations, and news in general. This doesn’t just mean keeping up with all the latest things in the world of crypto though. You’re not only required to follow crypto news but the news in general as big events in the world such as wars, new laws being passed or similar things can have big effects on the prices of various cryptocurrencies.

Being aware of everything that’s going on is one of the most important characteristics of any good crypto trader. It’s also important that you’re able to make good financial and market decisions based on that information but that can’t be done without first actually following the news so let’s take it slowly. If you already enjoy following the news and have a passion for new information then that’s absolutely perfect.

Be patient

Success in the crypto world rarely comes quickly. Usually, it takes quite a bit of trading to get your first big win and make good cash. In the beginning, it will usually be either small losses or small wins but both are fine as you’re learning and improving yourself. As with any skill it takes time to hone it and become good at your craft so don’t worry if you’re having a slow start, it’s more common than you may think.

Remember to pace yourself and not get discouraged. Keep a cool head, keep grinding, and eventually, you’ll reach success. There are many uncertainties in this line of work so it’s important that you are able to deal with them and keep going in spite of anything that may occur.

Have fun

The last but possibly most important thing is to enjoy yourself. Many of the best crypto traders genuinely enjoy what they’re doing and it’s that mindset that has allowed them to thrive in an environment that can easily swallow your wallet and mental health up. If you’re having fun and actually enjoying the market volatility and everything that comes with the job it’s a perfect recipe for success.

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What Every Investor Needs to Know about DeFi Coins and Tokens

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The DeFi protocol is one of the most hyped block-chain-based projects. DeFi or also known as decentralized finance aims to cut out all transaction middlemen and offer users unparalleled convenience and lighting fast service.

Since the popularity of DeFi is on the rise, it’s normal that more inventors are interested in DeFi tokens and the features they can enjoy. There are currently more than a thousand coins trading in this sector and its market cap is exactly $50 billion. So, it’s easy to see why some might want to take that leap and bet on the future of DeFi.

So, without any further ado, let’s take a look at DeFi coins and tokens and what you should know before investing.

The list of coins

As we slowly progress toward the future of blockchain technology, more and more DeFi coins emerge, and each of them is different from the others.

That being said, when doing your research, you might notice that DeFi coins and DeFi tokens are used interchangeably. However, that should not be the case as both have different features.

DeFi coins

DeFi coins (such as Bitcoin) were designed for monetary purposes and they can be used to purchase goods and services. If you are a seasoned veteran in the crypto world, you are probably acquainted with other coins such as Ethereum and Litecoin, which serve the same purpose.

Digital coins can rise and fall in price fast. This is called volatility and DeFi coins are as volatile as cryptocurrencies get. To save your wallet from a potentially disastrous trade decision, never invest too much when experimenting with DeFi coins.

DeFi tokens

While DeFi coins are used to make transactions, DeFi tokens work for the investor. What this means is that when you obtain DeFi tokens, you can earn interest on them and trade them to make profits.

DeFi coins are native to their blockchain while DeFi token assets are set up on extrinsic blockchains such as Ether or Bitcoin. Some of these tokens serve no other purpose than to have value, while others can be actively used for trading. Some investors obtain these tokens to have a proper hedge against inflation.

And now that we know the difference between coins and tokens, let’s take a look at why it would be a good idea to invest in them.

How to invest in DeFi tokens and coins

Many people believe that you cannot invest in DeFi coins or tokens unless you do so in DeFi protocols. This is not true because most cryptocurrency exchange platforms list popular DeFi tokens.

You probably already know how to buy cryptocurrency. But, let us walk you through the process once again:

  • Make a crypto wallet. You probably have one if you have ever invested in cryptocurrency. If you don’t have one, you should create one. It will be used to store, receive and send DeFi tokens. Some wallets out there are integrated with your crypto exchange of choice and there are probably guides on their site that you can use to ensure maximum security for your assets.
  • Purchase your tokens. After you have created your wallet, connect it to the governance platform that is used by your chosen protocol. You can then purchase any DeFi token that you desire and have it transferred to your wallet.
  • Lend or borrow your assets. After the assets are purchased, you are free to use them as you see fit. DeFi coins offer a unique feature that crypto coins do not: you can borrow or lend assets without having to give up custody. In turn, you can earn interest and set yourself up for a solid passive income.

But the reason for investing in DeFi is entirely up to you. If you do believe that these assets have the potential for growth, feel free to visit the major crypto exchanges to get your hands on them.

Final thoughts

If you are already active in the crypto market, you are probably well acquainted with DeFi coins and tokens. That being said, if you were not aware of the existence of these types of assets, it’s good to get into them as they have a lot of potential for success in the future.

Some individuals praise DeFi coins as the future of digital coins and if you want to be smart about your investments, keep in mind that a diverse portfolio is a good portfolio.

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Investing in Medical Companies

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There are many investment strategies you can use to reach your objectives. Some include diversifying your portfolio in as many fields as possible, while others call for narrowing your attention to one. Medical companies are an excellent place to start your search if you’re considering the latter as your strategy.

The healthcare industry can come in a few different forms, and depending on your interests and what you want to achieve, some options might work better. For instance, companies can be in the pharmaceuticals and devices, insurance, or even care provision sectors. Furthermore, market forces affecting one might not necessarily impact the others, while sometimes can have ripple effects.

So keep reading to learn more about investing in medical companies, and use this trading guide in the UK to help you get started.

Trends in the Healthcare Industry

When investing in companies in a particular industry, it’s always prudent to look at the sector as a whole to learn how trends affect them. The same applies to medical companies. Trends and events in other industry areas could significantly affect the companies you’re investing in and drastically affect your return on investment.

Furthermore, they can either be positive or negative and changes in trends adversely affect how companies in the health industry perform.

Positive Trends

  • An aging population
  • A longer lifespan for people with chronic diseases
  • Advancements in medical technology
  • The global spread of diseases
  • Customised medication

Negative Trends

  • Uninsured patients
  • Cost controls
  • Spread of consumerism

Where Can You Invest?

1. Big Pharma

Both pharmaceuticals and biotech companies are massive drug manufacturing entities. The main difference between them is how and what type of drugs they manufacture. Pharmaceuticals specialise in drugs made from small chemical compounds easily absorbed in the body. On the other hand, biotechs deal in drugs made of large proteins that don’t easily get through the cell membrane, giving them a slower intake than pharmaceuticals.

However, big pharma presents good opportunities to make long-term returns as an investor. But you have to be aware of a few factors before deciding which company to invest in:

  • What diseases and conditions do a particular company’s drugs treat?
  • What is the size of the market for said drugs?
  • Do the drugs meet all of the Medicines and Healthcare products Regulatory Agency standards, and how were the development and marketing handled?
  • How many patents does the company hold?
  • Are there any substitutes or synthetic versions of the drugs the company offers?

Once you have a clear picture of these factors, you will start to see the profit potential of the companies and know which ones to invest in.

2. Health Insurance

The other major player in the healthcare industry is the guy who foots the bills, the insurance companies. One thing to note about this sector is that there is a time delay between the rendering of health services and the payment of the bills. As such, it’s always best to look for one with a good reputation and a strong balance sheet to ensure it not only meets its obligations to its investors but the insured as well.

Another critical thing to look for while picking an insurance company to invest in is its medical cost ratio. This is the ratio between the cost of covering medical claims and the profit left after deducting them from the premiums collected. The lower this number is, the better the company is as an investment.

Reasons to Invest in Medical Companies

1. Strong Earnings and Growth Potential

In the last five years, the healthcare sector has seen a compounded growth rate of 8.1% in the S&P 1500. This has translated to excellent returns for investors, and the industry is only poised to do better.

2. Healthcare is a National Security Issue

The UK government views healthcare as a national security matter and can never let the industry run rogue or dilapidated. The industry also receives a lot of government support, and investors enjoy some of these perks and the investment security it affords them.

3. Health Care and Medtech

Investing in companies offering health care and Medtech increases the potential for future growth and returns while improving the human condition. The investments you make today pay off in the future in terms of good returns and better medical care when you fall ill.

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