Reason for Suzuki (7629), which announced an 80 billion yen loss, plunging after the drop and then sharply rebounding
Right after posting the article the other day,Suzuki (7629) announced a special loss of 80 billion yen due to a recall. For now, not buying at the time I wrote it was the right call.
In response to the announcement,the stock price at the start of the following week fell as much as 9.1%. However, it later rebounded, and today (April 17, 2019) the price is higher than before the announcement.
One reason for the rebound isthe "exhaustion of bad news".
Along with the special loss,they announced 170 billion yen in quality and safety investments over the next five years. The investigation report details fairly strong countermeasures, including strengthening inspection personnel.
Given they are doing this much, investors may think no more bad news will emerge.
Another reason issimply that market sentiment was favorable.
This week the stock price has continued its rise. If you ride this trend,the 80 billion yen special loss could be washed away smoothly. The market is fickle.
From the week's opening low, it has risen more than 10%, andthere is no lack of regret for not buying at the low.
However, given this week’s market performance is unlikely to be repeated,there is also a possibility that it could have fallen further. That is the risk.
As mentioned in the opening article, Suzuki’s future in India is of top priority. On the other hand, if they proceed with 170 billion yen in investments and stronger staffing,it will inevitably drag on near-term earnings.
If the economy slows, automakers will suffer significant earnings damage. After all, the automotive industry is a highly competitive field.
The value investor should not rush to chase short-term moves; instead, look long-term and pick good stocks at low prices.
