Why do stocks get clobbered so bad with earnings??
- Thread starter Cabin111
- Start date
That is because, the market EXPECTED, and hence PRICED-IN even better earnings. And since the corp failed to meet the expectation, this was actually negative news, and hence the price naturally drops to correct this.
From my experience, it seems in bear or choppy markets earnings moves lean more towards guidance, but in bull markets they lean towards current expectations/estimates. You may have also noticed there have been several
earnings "misses" where the stock shot up because they had one piece of guidance that was positive.
earnings "misses" where the stock shot up because they had one piece of guidance that was positive.
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
This over reaction caused my technical traders who just react to the chart creates opportunities for long term holders (especially for those bozos like Warren Buffett).
This over reaction caused my technical traders who just react to the chart creates opportunities for long term holders (especially for those bozos like Warren Buffett).
That model is overly simplified, FOR TRADING.
Instead of getting "pissed off" on something that is not understood, consider getting up to speed FOR TRADING.
There is plenty of information out there, that might get you to think you got the right model on earnings, but it is mostly aimed at buy and hold, passive, mutual fund holder.
Perhaps you are taking that information and applying it incorrectly. Sort of like mixing up premises and chart time frames.
Instead of getting "pissed off" on something that is not understood, consider getting up to speed FOR TRADING.
There is plenty of information out there, that might get you to think you got the right model on earnings, but it is mostly aimed at buy and hold, passive, mutual fund holder.
Perhaps you are taking that information and applying it incorrectly. Sort of like mixing up premises and chart time frames.
In a way I was just kidding...I do buy on bad earnings. I have done it for 40 years.
I look for quality stocks that have a bad quarter, but seem to be solidly based. This has worked great in some situations (McDonald's, Walmart, Apple, Avis/Budget), and badly (GE and GM...2008).
I look for quality stocks that have a bad quarter, but seem to be solidly based. This has worked great in some situations (McDonald's, Walmart, Apple, Avis/Budget), and badly (GE and GM...2008).
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GE had overly-inflated numbers. Basically, Jack Welch, the most over-paid CEO (ok, so maybe that of Enron was worse)... but Welch did receive the largest severance pay ever when he left. What did he leave? A zombie company that was left as a huge mess for the next CEO in line to clean up. Unfortunately, Welch focused on massaging the numbers for many years, and that only goes so far, especially when the stockholders and bondholders begin to wise up.
Meanwhile, you can read books on how great of a CEO he was and what amazing numbers GE pulled out of its hat when he was at the helm of the ship.
As for GM... there was some really fantastic stupidity there. Paying out dividends that were not-sustainable... and then taking on even MORE unsustainable debt, just to keep paying more dividends? WTF?! I bet Chanos fell out of his chair when his team were reading those financial reports at the end. This is basically the same shit Italian politicians have been doing, and they'll be expecting the rest of Europe to bail them out for it just like with Greece years ago.
Meanwhile, you can read books on how great of a CEO he was and what amazing numbers GE pulled out of its hat when he was at the helm of the ship.
As for GM... there was some really fantastic stupidity there. Paying out dividends that were not-sustainable... and then taking on even MORE unsustainable debt, just to keep paying more dividends? WTF?! I bet Chanos fell out of his chair when his team were reading those financial reports at the end. This is basically the same shit Italian politicians have been doing, and they'll be expecting the rest of Europe to bail them out for it just like with Greece years ago.
Isn't that the definition of a Ponzi? Take in new money to pay previous investors? I hope the newer lenders were banks, getting a taste of their own medicine.
