Investment Based on Business Results in the Stock Market

▼ Profit estimation by quarter is released from the stock companies.

Kim Joo-Hyung, Executive Director of LG Trading told that ``from this month, the profit estimation of the second quarter will be released to stock market and the companies of KOSDAQ.`` Choi Yong-Gu, director of corporate analysis team of Daewoo Securities said that ``within this year, we will establish a system to inform investors `profit estimation by year` of two years and `profit estimation by quarter.``

Jeong Tae-Wook, executive director of Hyundai Securities, told that ``we are constructing a `profit estimation model` in order to announce the estimated figure by quarter beginning from the third quarter.`` Other stock companies are known to launch the preliminary work to emit the profit estimation by quarter.

The US stock market moves according to the difference between the estimation of analysts and actual profits of companies, while the domestic stock market moves according to the absolute scale of profit or the increase rate. Hence the US stock market reflects instantly the future profit estimation and the past profit. Lee Nam-Woo, executive director of Samsung Securities said that ``if the way in which analysts estimate the future profit and re-estimate the profit of the next term based on the actual profit of the previous term is set up, then the stock price depends on the business performance and the corporate management will be transparent.

▼ Investment based on business performance

Presently, it is the best way to invest in the items that raise more profits. Experts see that short-term reflection to stock price is sufficiently completed since the profit estimation by each company was released before official announcement. What remains is the `gleaning`. Oh Sung-Jin, chief researcher of Hyundai Securities, said that ``the prices of most stocks based on good business performance rose greatly from the middle of March. Therefore, it is the better tactic to invest in the items whose stock prices remain constant in spite of good business performance.``

Long-term investors should take operating profit into consideration. Lee Young-Won, researcher of Daewoo securities told that ``investors should look carefully into operating profit. If the increase of the operating profit is found, then business environment should be considered; how much the business environment is improved and how long the favorable environment will continue.`` Park Hyo-Jin, director of investment strategy team of Shinhan securities, said that ``because the profit of companies was the highest, it is necessary to check out quarter-to-quarter comparison as well as year-to-year comparison.`` And Kim Kyung-Shin, director of Daeyu Regent securities told that ``in case that the difference between operating profit and net profit is found, it should be considered whether the difference is inevitable or not.``

Lee Cheol-Yong lcy@donga.com