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I thought I'd share with you some view points about quarterly reporting. I know that if you own a stock and go into the reporting calendar that it can be fearful. If you don't own the stock and go into the quarterly reporting, it too can be full of anxiety. The first is like "Oh Shucks, if it reports bad and tanks, Ohhhh blank blank blank." The second is similar, but opposite; " If it reports great and takes off ,,, and if I miss it, Ohhhhh blank blank, it already took off and is now to far extended". I think you get the point.
I'd like to share ways that I've learned how to handle this.
If you own the stock, you need to know every aspect about the company before it reports. In saying this, I also mean to understand how its peer group should or did perform. Hopefully, your choice is with the leader of the group and not the follower . Typically, the stocks will move in unison. I suppose you've already figured that out, but if not, they do.
This brings me to what I've learned to be key during quarterly reporting, and that is to listen to the conference calls. If you can't do so when they occur, because of time constraints, try to listen as close to, after the fact, that you can. Here, they will tell you nearly everything that is going on with the company. The management team has to do so legally. Perhaps they won't give you information that a competitor would use against them, but everything else. What I've really enjoyed doing is deciphering some of the information. I'll get to that a bit later.
Yes, you can get all the financials via a web, email, or phone alert, but that only tells you a small portion. In this, I'm referring to " tone". For this, you will have to listen to, perhaps five different conference calls to understand. You can gain access to them through the phone or webcast. There is always a replay and archive of each. Sounds boring I know, but it's your money, you need to know. As a practice, pick any 5 companies from one of our industry groups and listen to their last quarter reports.
Let's digress a moment and conclude a few facts. The big money moves a stock. It's not the small investor. Typically, it's the Institutional investor. Ask yourself, are they going to drive the share price up just before a reporting cycle ? Most likely not. There would have to be great and truly unique news for them to do so. If you own a stock and it just came out of a base, you're wanting and cheering the stock to rise, but that's probably not going to do so just yet, if the reporting for that company is in a week or two. They may bring it up to book value but surely won't extend it.
Ask yourself, what does the big money like ? They like growth, new products, new services, and perhaps a new method of processing or manufacturing. This is the same stuff that we like with the IBD system. When they hear of facts that will drive ARG (accelerated revenue growth), they know that company has something unique. They then, want more of that stock.
Okay, so let's get to the fun part. You read or hear how the company did. They missed numbers, met expectations, or exceeded analysts estimates. What's that mean ? Not sure. You're going to need more information. This is where the tone of the conference call comes into play.
The way these are conducted is that there will be an opening safe harbor statement followed by typically the CEO or chairperson. They will paint the picture for the finance person. The finance person will give his/her view and facts and turn it over the the lead person. Ask yourself, do these people rush through the information, does their voice quiver, do they Humm, Ummm, Well ? Is their speaking with confidence genuine or are they just good at speaking? Do they know details of the business ?
Then comes the fun time, the questions and answers. When the analyst for the investment bank says something like "Humm, sorry that revenue wasn't up to par, can you provide us with some color about XXXX". He or she doesn't want to put money into that situation. That person is saying to him/herself, "I don't want to put money with you, tell me more, did I miss something, maybe I was confused". If the analyst says something like "congratulations on a great quarter, I wanted to ask you about XXX", that investment bank is in the starting block and ready to go if he/she gets the answers he/she is hoping for.
If you can, watch the stock as the conference call is underway. Sometimes it will move before the call is over. Other times it could happen a day or two. Remember this, there are times when the person listening to and engaging in the call, doesn't have the authority to say BUY/SELL. He/she may have to confer with others prior to doing so.I'm sure they all have differing chains of command.
-Well just some thoughts,
I hope this helps. Let me know one way or another.
Thanks for that great post. I don't listen to many conference calls but after reading your post I definitely want to make it more of a habit to get on some of these calls.
This is great advice and I'm going to add it to my routine.
Thanks once again!
Great to hear that it may be valuable to you. Let me know how it goes. I suspect the "community" too would like to hear your perspective.
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