3rd Quarter Earnings - Anyone Notice
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audreyh1
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Interesting observation.
pb4uski
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Not sure I care much as a long term investor.
NW-Bound
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When a company's earning report disappoints, it is not strange that its share price drops. A blemished good has to sell at a lower price.
What is more notable is that some companies exceeded expectations and reported earnings surprise as high as 20%, yet that induced no price rally. That tells me that the good news were already anticipated and built into the share price. Many semiconductor companies fall in this group.
To be fair, some positive earnings news were true surprises, and the company shares took a jump. Examples include Caterpillar and 3M.
What is more notable is that some companies exceeded expectations and reported earnings surprise as high as 20%, yet that induced no price rally. That tells me that the good news were already anticipated and built into the share price. Many semiconductor companies fall in this group.
To be fair, some positive earnings news were true surprises, and the company shares took a jump. Examples include Caterpillar and 3M.
Texas Proud
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I think this happens no matter what the market is priced at...
And I have seen a company beat but lower there expectations of future growth and also get killed...
The market can be fickle...
And I have seen a company beat but lower there expectations of future growth and also get killed...
The market can be fickle...
marko
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That's pretty much how it works. Companies imply expectations with analysts and.....
jazz4cash
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That's my observation and the companies generally provide guidance so I don't really understand why there are any surprises, esp on the upside. When the earnings are bad but not as bad as expected is most interesting to me since it may indicate a turnaround in process.
HillCountry
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Future guidance is more important than current earning.
audreyh1
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Well - there have been some blow-outs (or ups?) this week too. Wow - Amazon - up over 13% today on earnings! Apple up over 3.5% because iPhone X sold out in a few hours overnight.
NASDAQ - I think this may be the largest point jump in a day I have every seen - 144.49.*
Felt like a massive short squeeze.
Well - it turns out that it is not the largest point jump in a day. Back in 2000 there were several 200+ point days on NASDAQ and on 1-3-2001 +324.83
More recent high point days:
8-26-2015 +191.05
10-13-2008 +194.74
Except for those two and the highest point day at the start of 2001, the remaining 20 high point days all occurred in 2000!
* Today was the highest point jump since 2016
https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Nasdaq_Composite
NASDAQ - I think this may be the largest point jump in a day I have every seen - 144.49.*
Felt like a massive short squeeze.
Well - it turns out that it is not the largest point jump in a day. Back in 2000 there were several 200+ point days on NASDAQ and on 1-3-2001 +324.83
More recent high point days:
8-26-2015 +191.05
10-13-2008 +194.74
Except for those two and the highest point day at the start of 2001, the remaining 20 high point days all occurred in 2000!
* Today was the highest point jump since 2016
https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Nasdaq_Composite
Last edited:
gcgang
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Seems like volatility is picking up. The past couple of days, several stocks I own are up over 5% ( mostly tech or industrial), at the same time others I own are moving down over 5% ( mostly healthcare). I don't know if that means market is priced on the high end, but there does seem to be much larger moves than what normally happens.
OldShooter
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For those interested in this general topic, here is a great video discussion with Gene Fama and Richard Thaler.
Are markets efficient? | Chicago Booth Review
FWIW, I am inclined to believe the efficient market hypothesis, but maybe not always on a day-to-day basis. Both Thaler and Fama seem to agree that the EMH, though, is a good basis for investment decisions.
Are markets efficient? | Chicago Booth Review
FWIW, I am inclined to believe the efficient market hypothesis, but maybe not always on a day-to-day basis. Both Thaler and Fama seem to agree that the EMH, though, is a good basis for investment decisions.
Graham said it well: "In the short run the market is a voting machine, in the long run a weighing machine".
Since prices are made where the most depressed current shareholder and the most enthusiastic prospective buyer meet, emotions are always a factor.
Also, it is impossible that all information is processed and received by every participant in the market in the same optimal way, so differences arise. In my mind, markets cannot be efficient. It's a ludicrous proposition in my view, except in the longer term: successful companies raise in value, unsuccessful ones don't. But the swings and mispricings are enormous.
Just ask the Medallion fund.
Since prices are made where the most depressed current shareholder and the most enthusiastic prospective buyer meet, emotions are always a factor.
Also, it is impossible that all information is processed and received by every participant in the market in the same optimal way, so differences arise. In my mind, markets cannot be efficient. It's a ludicrous proposition in my view, except in the longer term: successful companies raise in value, unsuccessful ones don't. But the swings and mispricings are enormous.
Just ask the Medallion fund.
NW-Bound
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Companies do not want to disappoint, so they generally hold back a bit in their forecast as reserve for a future positive "surprise". In the tech bull of the late 90s, Cisco under the then-CEO Chambers managed to beat projected earnings by a little bit for so many consecutive quarters that it became expected (the so-called whisper number).
It was during this period that Cisco became the world's largest-cap company, and was destined to be the first "trillion-dollar" company. The dot-com and internet crash changed all that.
Yes. When one hears this, it's "buy, buy, buy".
Much better chance of making money than catching the falling knife and buying on the way down.
NW-Bound
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Here's a case of a huge crash when a company's earning report disappoints.
Yesterday morning, I logged into my brokerage account as I always do in the morning while drinking my tea. It's a ritual to see what's going on, whether I will be trading or not. Saw that I had a 5-figure drop, while the market was flat. What the heck?
Discovered that a holding of mine had a big 30% drop! Uh oh! They reported earnings, and it only matched expectations. I did not see that their look-forward statement was bad, but they were not gun-ho. The stock continued to slide down during the day. Today, it recovered a bit.
I bought this stock after the 2009 crash, and at this point still have a 3.5x gain. As of pre-earning, the gain was almost 5x. I am not selling and will hold it, as the P/E is now not expensive at all, and even cheap compared to the S&P average.
This is a small-cap technology company, and hence is extremely volatile. As a rule, I keep all my positions, particularly of small companies like this, at 1 or 2% of portfolio for each individual company. Else, would make a lot of money, or lose a huge amount.
Yep, risk and reward go together. No such thing as risk-free returns. Yet, return-free risks are always available. There's that asymmetry in life. Life is never fair.
Yesterday morning, I logged into my brokerage account as I always do in the morning while drinking my tea. It's a ritual to see what's going on, whether I will be trading or not. Saw that I had a 5-figure drop, while the market was flat. What the heck?
Discovered that a holding of mine had a big 30% drop! Uh oh! They reported earnings, and it only matched expectations. I did not see that their look-forward statement was bad, but they were not gun-ho. The stock continued to slide down during the day. Today, it recovered a bit.
I bought this stock after the 2009 crash, and at this point still have a 3.5x gain. As of pre-earning, the gain was almost 5x. I am not selling and will hold it, as the P/E is now not expensive at all, and even cheap compared to the S&P average.
This is a small-cap technology company, and hence is extremely volatile. As a rule, I keep all my positions, particularly of small companies like this, at 1 or 2% of portfolio for each individual company. Else, would make a lot of money, or lose a huge amount.
Yep, risk and reward go together. No such thing as risk-free returns. Yet, return-free risks are always available. There's that asymmetry in life. Life is never fair.
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