Earnings Season: Separating the Wheat from the Chaff

Earnings season is here, and it’s clear that there remains a lot of bad news in the pipeline. This is not good, but the silver lining in all of this is that 2009 will mark the delineation and divergence between businesses who have used cheap credit, excess consumption (relative to savings and earnings) and government subsidies and operate in mature/declining industries and those who are growing and have an opportunity to exploit the retrenchment of the former companies.

You see it everywhere: Alcoa (AA) bombed Monday night and announced larger than expected losses, yesterday we learned that Sony (SNE) might lose $1B, their first loss in 14 years. Sony has coasted for years and lost major opportunities to competitors like Apple (AAPL) (in digital music) and Nintendo (NTDOY.PK) (gaming). This is not to say that either company is doomed, but as they scale back their businesses, a lot of opportunities are created for new players to attack. This is exactly why some VCs are setting up new funds.

Comments

[donzelion:]

"Earnings season is here, and it’s clear that there remains a lot of bad news in the pipeline."

Perhaps, but for an investor, isn'tt the real question, "to what extent is the news - good or bad - already incorporated in the price?"

Jan 15 05:38 AM