Suppose Pfizer was expected to earn 95 cents per share in 2013 and they announced the acquisition of another company and the acquisition was expected to add 6 to 7 cents to 2013 earnings and 16 to 18 cents to 2014 earnings. They just announced that this years earnings would be over 6% higher than previously expected and next years earnings would be about 17% higher than 2013.
At 10 times earnings 17 cents = 1.70. Yeah, discount that for time because the end of 2014 is 18 months away and discount that for risk. Suppose a 50% combined discount is warranted. Then 17 cents = an 85 cent increase in price......5 time the increase or a 20% capitalization rate. A nice gain following an unwarranted (imo) beating. Just no respect being shown here, despite what appears to be significant short covering.
Oh well, I have the time to collect increasing dividends until the "show me" market sees it in the rear view mirror. By then, of course, more insightful investors will have seen it coming. Those who wait until it's historical, reported fact will simply pay a lot more than those who see it before it happens.
Unfortunately NRF did this announcement before the stock filled its gap between $8.12 $ $8.17. The shorts won’t start to cover until we hit this. We probably would have hit it today and started our way back up, but now because of the news, we will have to wait another week or two too fill the gap.