RSS feedWell, here we are at the start of another earnings season. Investors are at the edge of their seats wondering what to do hoping that earnings, or at least guidance, for the last quarter will soothe their fears of a slwoing economy and slowing consumer demand. So, what is one to do? If you’ve invested along with The Curious Investor over the last few months, you may be itching to take some profits especially with such potential for loss should earnings disappoint by the barest of margins. Companies like Apple and Google have rocketed in anticipation of earnings which leaves some wondering whether or not there’s still room for appreciation with an earnings beat much less just meeting estimates.
Well, there’s nothing wrong with going to the sidelines during earnings season. After all, earnings season offers all sorts of opportunities for buying before and after reports. If you’ve got some gains to pocket, why not go to the sidelines and watch the markets like a hawk waiting for that next tasty morsel?
This article mentions a “spectator strategy” for earnings seasons which seems to support my rather qualitative claims and serves as a great read for those put off by the stress of hoping and praying for earnings.
In the next few posts, I’ll be examining what to do with those profits you’ve taken and how to reinvest to capitalize on various investor reactions to earnings reports. We’ll talk about fading gaps, anticipating breakouts, and just straight-up buying breakouts.
For now, to spur conversation and help to feed the free book giveaway, what do you guys all think about the Portfolio A position taken in Apple. It’s up 12% since I bought it on 9/25. While some early analysts are reporting stellar sales for the iPod, Apple’s near 50 PE ratio seems to be pricing in growth sustained growth that I cannot justify. Are there really that many drivers for earnings growth? iPhone sales are all well and good, but we’re talking about a price point which was cut by a third and volume estimates which have remained steady (albeit at astronomical levels). AppleTV has seemingly not garnered the attention it deserves and, while Apple’s personal computer sales are way up, is it enough to justify such valuations? If you ask me, Apple is less of a tech company than a high-end consumer products retailer. It’s not innovation, per se, which drives the company but its ability as a product hitmaker which drives growth.
Is it time to quickly trade out and book the profits?
October 14th, 2007 at 11:19 am
I think having some cash on hand going into earnings season is a good move so that you can react as the news moves. Earnings season is exciting and the action is very unpredictable.
October 14th, 2007 at 1:43 pm
As a trader you should have an exit point (profit and loss) to exit your trade. 12% gain in less than a month is good profit potential but not sure what was your profit target.
As an investor I agree that Apple valuation may be a little pricy BUT Apple is an innovator. They have proven their status by successfully launching great products and sustaining the momemtum. Again there needs to be significant committment to Apple’s future prospects before one invests in Apple. I would wait for a dip before getting into Apple.
October 15th, 2007 at 1:47 am
I think you should definitely hold onto Apple, the stock is on the rise and in the past week came close to breaking 52-week heighs. I dont see Apple, becoming stagnant or dipping due to earnings. On the contrary wouldnt be suprised to see this stock break the $190-200 mark after expected good fourth quarter earnings are predicted. Like you mentioned the iPod and iPhone are tremendous sellers, AppleTV im still a little sceptical about, but i dont see it being a bust on company earnings. However, the Apple stock has had a tendency to fluctuate a bit based on rumors and investor speculation. However, as a stockholder these fluctuations should be expected, and not be seen as an indication to pull out of your position. There has been rumors of a possible Apple spit as well, but wouldnt bank on it. Just like Google, there is an inherent confidence an investor feels about a high priced stock that Apple wouldnt jeopardize with a hasty stock split allowing further speculation on the stock. All in all sorry for the long post, but see Apple as surpasing earnings, breaking 52-week highs if not moving into the $200s ALL before significant loses.