Trading Tips
Trading Tips
One Corporate Event that Creates Buying Opportunities Time and Again
There’s an old market adage to buy when there’s “blood in the streets.” But there are plenty of ways to draw blood.
In today’s litigious society, one such way is with a big lawsuit. From hot cups of coffee to weed killer that may be cancerous, it’s no surprise that America still leads the world in producing lawyers who need something to do—which usually means finding someone with deep pockets to sue.
While many cases have their merits, a favorable jury will often hand out pretty sizeable sums—and that kind of news can set back the shares of a company’s price. The days of the biggest legal battle of them all, regarding the tobacco companies and healthcare costs, seem long past.
But are they? In the twenty-first century, new legal battles are forming. And one place they’re forming in are in the opioid space. Abuse of opioids—legally and illegally—have been on the rise for a long time, and some places are starting to go after the companies that manufacture them.
While some pharma companies have already settled with states to avoid the potential for large jury payouts, one company is bucking the trend. Johnson & Johnson (JNJ) is defending itself against the state of Oklahoma, which is suing the company on the basis that it helped to fuel the crisis.
While we don’t know yet how this trial will end, we do know that these often high-visibility trails don’t kill companies—although they do hurt their share price in the short-run. From McDonald’s to the tobacco space, buying during times of literal trial are often the most profitable.
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