Trade The Journey

Trade The Journey

My First EARNINGS call!

“Earnings call is a conference call between the management of a public company, analysts, investors and the media to discuss the company’s financial results during a given reporting period, such as a quarter or a fiscal year. An earnings call is usually preceded by an earnings report. The report contains summary information on financial performance for the period.
If you own stock or follow a stock, you’ve probably received an invitation for an earnings call. An earnings call is the companies way of keeping the investor informed on the companies direction.”

Investopedia- Earnings Call

It’s a call to explain why the earnings were low, high or stayed the same. There are several ways you can gather information on a company. The data is available in every format: graphs, charts, text, and videos

If it’s a popular stock, analysts are following the stock, and you’ll have a good idea of what’s going on. As you move more towards trading you come to rely on analyst especially if you aren’t knowledgeable in accounting. The earnings call is the opportunity for you to hear it directly from the company.

The stock price fluctuates based earnings and depending on the tone of the call, the stock price can vary even more. What investors like myself want to hear is confidence. We want to hear that you have sound strategies for improvement and money management. We want to understand why we should continue to keep our money invested. If something isn’t working, what’s your solution to remedy the situation?

When the earnings call begins, it almost feels as if you are exclusively on a call with the company. It seems as if your receiving privileged information on the different developments regarding the company. Nothing could be further from the truth. By the time the information reaches the public, those in the know already know.

It’s almost similar to technical indicators that investors use to try and predict a price movement. Some of the tools are needlessly complicated, others are simple yet accurate and some are useless — the same with the call. Flip the word tools with information. Learning how to read between the lines is what’s important.

The call I first listened to was the Monster Earnings call. Being honest, I have to admit that I did not finish reading their annual report or their earnings report before the call. I did learn about the nature of Monsters relationship with Coca-Cola. I also heard about their plans for reaching the international consumer. Monster’s brand internationally is not as strong as it is domestically.

I’d have to say the best part of the call is the question & answer portion. For starters, you get to hear what the professional traders/investors are focusing on for evaluation. Secondly, you may gather a better understanding of the companies position than initially gained from the presentation.

You can learn a lot about the managers through questioning. Nothing is more discouraging than hearing the manager stumble through questioning due to lack of preparation.

How well are the managers answering the question? Are they being forthcoming with the information or trying to conceal the actual reality of the situation?

One strategy I’ve heard mentioned in books on Warren Buffett’s’ investment strategy is “comparison”. Mr. Buffett compares the vision of management stated in the annual report from one year to the outcome in the following year. Did management stick to their plan? Did it work?

Listening to your first earnings call shouldn’t overwhelm you. Even if you don’t know all of the terminology being used that’s okay. You can write down the terms and look the terms up later.

Make sure to bring your notebook to keep track of what was said. I like to write down management’s take on their companies position and compare it to what analyst are saying.

Companies allow you to replay their call from their website. Take advantage of this. You don’t have to own stock in a company to listen to their call. So don’t be discouraged from doing so. Include an earnings call in your research before deciding to invest.

Questions? Corrections? Thoughts?

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