This Week: Drowning In Earnings Data - the first-time investor must understand why earnings are important.
It’s important for the first time investor and financially savvy individual to understand, or at least be aware of, the plethora of news, economic data, and market wide company press releases that serve as the basis for trader decisions. The amount of investor news that is available thanks to the internet is so overwhelming that, at times as I do my daily research, my laptops begin to overheat and hum. I don’t know whether to stop and take a break, or risk my Dell exploding into a thousand shards of plastic and metal while I’m mid-sentence typing.
Let’s talk in relative terms and take it back to 1998, when the Chicago Bulls clenched a title over Utah Jazz during Michael Jordan’s last game; when Osama Bin Laden made worldwide headlines by bombing US Embassies (sadly, this was one of the public’s first introduction to the terrorist leader); and the iconic year that two Stanford computer science students founded Google, Inc., which went on to revolutionize the way we use the internet and become one of the most profitable investment opportunities in history for a very lucky few (Google’s stock price has multiplied itself by many times over since it’s initial offering price of $85/share; while today it sits at $524/share. Further, consider this: the initial round of privateinvestment, when Google was incorporated in a California garage, was only $1.1 million. Those original investors have likely seen their investment multiple itself by a thousand times in just over 10 years, assuming they’ve held those investments up to today).
Google is an amazing story, but it’s fit for another time. In fact, take a minute and read the story from wikipedia.org after you’re finished here. The point I want to drive home is this: 1998 was a very special year, because it brought together technology (the internet) and innovation (Google) to deliver to you, the consumer, vast potentials for locating detailed information on just about anything. In this case, I’m talking about information that is important and sensitive to investors that wasn’t always available. Up until the explosion of dot-com, if you wanted investor information, even the easy to use calculations to determine values of public companies, you had to go through either a library, the company itself, or your stock broker, all of which would either cost you time or money, both equally precious. But now that the internet is here, information is available at your fingertips, 24 hours a day, 7 days a week. And it’s great because it has put you, the small fish in a big pond (the first time investor) in the driver’s seat. No need to be dependent on Wall Street’s investment firms and high-commission bankers to relay to you, what probably in most cases was biased anyway, information. You can do it yourself, and cut out the middleman.
Of course there’s a trade-off, because nothing in life is free, especially in the investment game. The problem is information overload. There is so much information, it’s nearly impossible to tell what is trustworthy and what isn’t; what’s current and what’s outdated; which publications tends to spin or bend the truth and which straight out life.
Frankly, it’s gives financial entrepreneurs like me a free soapbox to post up on and preach anything we want. You have no guarantee that I or any other writers, publishers, analysts, financial planners and the like know what they’re talking about when it comes to internet and information publishing.
So in the end, it’s all about doing your own research with a little help, a leg up to get you going, or directionality. I don’t expect you to just start following my recommendations. I have no problem doing my time, putting in the due diligence, and THEN begin building a reputation with my members and the investment community. So in the meantime, I can provide members with only one real assurance – that anything I’m recommending I’m holding or doing myself. Any products this website is advertising have been used, tested, or are currently being used by me everyday. There are several advantages to this approach; the most obvious I think being trust. I’m a bulldog when it comes to my work, my passion, and my money-and you can bet that while I will make mistakes in my life, I’ll be making no foolish or uneducated decision, and I won’t let you either.So this blog, and the ones from here on out will be featuring a section that loosely lays out the news, economic analysis and forecasts, or market movers, referred to loosely as “data” among investors, for you. It will be simple to use and navigate and will be updated often, so keep checking up.
Events to Watch This Week: Earnings, Baby
Here we are, smack dab in the middle of earnings season, again. “Earning season” happens four times a year as companies release business data, most notably:
-Financial Statements (income, balance sheet, and cash flow numbers)
-Business operations information (broad business conditions, revenues and expense figures, one-time charges and current state of financial positions)
-Forward-looking statements (what the company is projecting next season and/or next year)
Earning season happens four times a year, during what we call “Quarters”, split up by the four seasons and then by years:
Quarter 1 (Q1) – January, February, March
Quarter 2 (Q2) – April, May, June
Quarter 3 (Q3) – July, August, September
Quarter 4 (Q4) – October, November, December
Yearly Statements – Fiscal Year 2009-Fiscal Year 2010
Quarterly Statements are released at different times throughout earnings season, but normally will be about the 2nd or 3rd week of the month FOLLOWING the end of the quarter (so, for example, this week we are hearing quarterly earnings releases from companies relating to Quarter 2 (Q2) since it’s the second week of September).
Companies have different release times, dates, and so on. The companies whose stock Bullworthy.com owns will not be releasing their data for a few weeks, and as it comes, we’ll be posting. Because we won’t be hearing from our companies for some time, we can use the reports that will be released from competitors in our sector and industry this week to get a feel for overall market and competitive conditions. Then we can compare that to the data that is released by our companies. Everything, for now, is just estimated. But we can be sure of is this: in this economic climate and the conditions of current markets propped up by this fragile economy, surprises are sure to be had. The only thing we can do it try to estimate whether those surprises will work in our favor or not. Companies of interest releasing data this week:
Intel Corp. (technology, benchmarked against our holding RF Micro Devices),NovaGold Resources, Inc. (gold, against IAMGOLD Corp.), and KMG Chemicals, Inc. (chemicals, against Converted Organics, Inc.).
In addition, the third Friday of certain months mark expiration periods for options, a derivative investment that is used to hedge, or protect against risk of holding a stock. This is a technique we leverage, so this Friday is important. We, however, cannot recommend options trading to the first time investor. It’s very complicated, and in most cases, unpredictable. If you are interested in learning more about options, we’ll be happy to provide you with a good hands-on start. As always, contact us here for more info. Guess who else is reporting earnings this week? Google is expected to report earnings per share (or EPS, a basic calculation of how much a company earned per share outstanding and owned by investors) of a healthy $5.38. That could turn out to be chump change compared to what Google could be earning in the years to follow, but that’s a whole other blog.
To contact the author of this article, please visit Bullworthy.com. Bullworthy is a financial platform for first-time investors, savers, and planners.
Disclosure: long COIN