Navigating around earnings warnings:
Good question - simple answer - if I have a goodidea what its going to be per DD, I watch the option and large transactions a few days to a week and a half before. If I don't know what its shaping up to be, then I just avoid it.
But, believe it or not, there is actually a pattern in what is getting killed and why. Some stocks take a beating just because their subsector or most-similar-competitor does, and some come out with horrid or great numbers with little notice. The biggest concern is really with growth potential - not merely earnings growth, but fundamental growth.
Look a the company and ask yourself if this is one that is pretyy much in a niche, regardless of whether it is a leader or not, and does it have the ability/desire/smarts to integrate itself either vertically or horizontal;ly in the markteplace. And it doesn't have to be a tech stock to use this screen on.
BOST failed the test, as did CPU and BAY. All different kinds of stocks. Were they were all capable of it last year and lost their grip on the market? Does the next company make a great widget, or is it able to expand and engulf some of the food chain in front or below it? Or its peers.
There isnt really a merger mania - there is a a competitive edge being incorporated by either bringing in strategic elements or divesting themselves of the dogs. Look at the stocks that took a hit and you will find one common thread for just about all of them - they weren't growing or advancing or becoming more viable - at best they were doing ok at what they do, and that just isnt enough to get the funds to want to invest in you.
So do I care if SYQT is going to make me a buck or not this week - not really. I wanted as sign that it was integrating itself with the winners (if you can't be top dog, at least be in his pack). Why is AOL continuing up and DELL droppin g or leveling? Because AOL is continuing to enrich its market share by collateral investments and agreements outside of its core business area - for future benefit. What is dell doing - its making computers. Ok, but so what, there are GTW, NEC, CPQ and a few others out there doing that. If I were a fund, i would want to know what you were doing to broaden your market base, not refine it.
Don't look too closely at the earnings or growth or TA or FA or whatever at first. Ask if the company is going somewhere, not if its been somewhere. Take a large view at the company first. If you are satisified, even from just reading the paper or seeing ads that its a growing concern, then do the dd. 95% of the time, your impression will be a better judge than any pile of numbers.
Careful when you pick a brain...you could get gray goo all over your picker...
lastshadow |
