Information overload: Finding the right trading signal for stocks
July 17, 2024
Retail investors’ interest in the stock market has increased rapidly in recent years – especially among young adults. In 2022, 600,000 Germans under the age of 30 invested in shares for the first time.1 Access to financial market information has also become broader and includes sources such as analyst reports, financial market specialists, friends and family, online news, social media as well as company websites.2 More information often leads to more confidence in financial decisions but not necessarily to better results.3 In light of this information overload it is all the more important to identify the right source of information as trading signal for stocks.
Information overload can be counterproductive for investing
Let’s assume it is the last weekend in June 2024. A retail investor considers buying shares of the real estate group Vonovia.
- Analyst reports: In June 2024, financial market specialists published six analyses on Vonovia. Four analysts recommend to buy while one analyst each recommends to overweigh or underweigh Vonovia shares. The average target price is EUR 32.65.4
- Technical analysis: The Vonovia share price (Xetra, closing price on June 28, 2024) is EUR 26.55. It is almost 14% below the 52-week high of May 16, 2024 and nearly 35% above the 52-week low of July 7, 2023. The share price is above the 50-day moving average, which is often used as a benchmark for short- to medium-term trend observations. It is below the 200-day moving average, which is often used as an indicator for the stocks’ long-term performance.
- Key performance indicators (KPI): An important KPI is the price-earnings (P/E) ratio. It sets the share price in relation to earnings. In the 2023 annual report, Vonovia reports a negative P/E ratio – for the second year in a row.5
While the analyst reports are rather positive and the technical analysis shows a mixed picture, the P/E ratio gives a rather negative impression. Hence, it likely is difficult for a retail investor to decide whether or not to buy Vonovia shares.
BOSS STOCKS “cuts through the noise” and delivers the right trading signal for stocks
It was released on July 4, 2024, that Ruth Werhahn, member of the management board at Vonovia, bought shares on July 2, 2024 at a price of EUR 26.25 and worth EUR 168,776. Previously, she bought shares two times in such a director’s dealing since 2023 (last time in 2024). In the following ten trading days, the Vonovia share price (Xetra, closing price on July 16, 2024) rose by more than 8% to EUR 28.44. BOSS STOCKS helps you replicate such directors’ dealings. Free sign up to discover the directors’ dealings that can help you yield superior investment returns ahead of launch.