This from the NZ Herald this morning…. journalists still don’t get it:
“It's difficult to fathom how a company can report a 66 per cent decline in profit but still see a 12 per cent leap in its share price. But that's just what American heavy equipment maker Caterpillar found this week as investors responded positively to a result better than they had feared and a forecast…”
Investors are of course looking at the present value of expected future earnings. Possibly, just possibly history confirmed the way those expectations were formed…. but that’s all.