It’s my favorite season, and I don’t mean summer. And I’m not a hunter so I don’t mean deer, rabbit, bear or duck season… I’m a trader. So I’m talking about earnings and what to look for in earnings season.
All pro traders get a little bit happier this time of year…
I mean just look at Joy of the Trade Head Trader Jeff Zananiri…
For our newer folks, earnings season is when a publicly traded company releases its most recent quarter’s financial results. This gives us an inside look at the company’s true performance and can indicate its actual value… So it’s important!
As we enter my favorite season, it’s good to go back to the basics and talk about what to look for in earnings season. So I’ve put together three things I look at…
One of which I consider the most important thing to watch for that can help you get in on more winners.
One of the main things to look for during earnings is analyst expectations.
Have you ever heard about a movie from a friend who hyped it up… and then the movie was just OK?
You were disappointed, right?
Or in the reverse, say your expectations are set low and the movie is decent or even good… That movie then passes your expectations and it’s a great feeling.
It’s the same way with earnings and results.
I want to see if there’s a gap between what analysts’ expectations for the company are… and what actually happens. It’s a game of matching reality to expectations and judging whether or not the company over- or underperformed.
Another thing I look for in earnings season is growth. Have earnings improved since previous reports?
The caveat here is to make the right comparison. If you’re looking at first-quarter earnings, do you compare them to the previous quarter — the fourth of the prior year?
No! Because as you know, the first and fourth quarters are two different animals.
What you want to do is take that first quarter of earnings and compare it to Q1 from a year ago — an apples to apples comparison — and see if the company grew or not.
There’s one final thing I take a look at… and it’s the most important of these three.
So check out my short video below to see what to look for in earnings season, and as always like and subscribe to our YouTube channel. Also, on Thursday, July 13, I’d like to invite you to an event for my Alpha Trades service where we can talk about earnings and more.
P.S. We’ve all heard that buy-and-hold strategies are the surest way to make money in the stock market…
In fact, one Wall Street insider just revealed the secret to making triple-digit gains on stocks like Facebook and Apple… in as little as 24 hours.
Why wait years for returns… when they can be enjoyed today?