It is widely rumored that Apple will be announcing its new iPad Mini in the next week or so. To anyone who’s followed Apple and its stock performance this really should be of no surprise. Apple, to some extent, is leveraging what is commonly referred to as Earnings Season to help boost the product launch. Much like the widespread speculation that has surrounded the launch of the iPad Mini, there’s commonly speculation that surrounds Earnings Season for many companies. The question is though how does Earnings Season impact you and me?
What is Earnings Season?
Boiling it down, Earnings Season is when publicly traded companies announce how they’ve done in the previous quarter. They share such things as how much money they made the previous quarter, how much they spent, if they foresee any new product launches and possibly if they see any changes to what will happen in the future. Often times, they’ll hold conference calls in which stock analysts will ask them questions related to the companies announcements. As you can imagine, the information provided during Earnings Season could possibly provide a wealth of information.
Just like there are four seasons in many climates, there are four seasons in the investment world. The Earnings Season takes place in January, April, July and October. So, as I am writing this post we’re entering the throws of the final Earnings Season of the year. Additionally, when they announce in January we’ll see just how strong the Christmas shopping season was for retailers. Many economists will also take what they learn during Earnings Season to predict what they think the economy will do in the future.
How Companies Use Earnings Season
Much like a high schooler wants to look their best at the school dance, so do most companies like to look their best during Earnings Season. But, under all that makeup and Clearasil lies the naked truth. The fact is that many companies can put out misleading information with the hopes of affecting stock prices in some sort of fashion. They can also say that they’ll make a certain amount of money previous to the announcement, only to blow it out of the water when they make their official announcement during Earnings Season. Apple is infamous for supposedly engaging in this practice. They’ll state that they’re going to make one amount, only to beat it by a significant amount in their official announcement at the end of the quarter. If a company does beat their estimate by a significant amount, then they can usually expect the stock price to rise quite a bit. On the flip side though, if they miss their estimates they can drag down stock prices.
What Impact Does Earnings Season Have on Your Investments?
The focus you put on Earnings Season really depends on the type of investor you are, as there can be serious swings in the stock price in the days surrounding the official announcement. If you’re a buy and hold investor then it won’t have much impact on you, unless the company announces that the CEO has left town and has moved to the Cayman Islands because they’ve pilfered millions of dollars from the company. But, if you’re a more active trader then you’ll be watching it closely. Then, there’s the third group of people…geeks like me who enjoy hearing all the news. Seriously though, Earnings Season can provide a wealth of information if you know what to look for and assuming the company is transparent in their reporting. Assuming that this is true and you just do normal stock investing, then it really will have no major impact on your investment philosophy. There is much information to be had during Earnings Season. Some good, some not so good. The key is to stick to your investment plan and not make any emotional decisions regarding your portfolio.
Is this the first time you’ve heard of Earnings Season? What are your thoughts if it is? Will you be buying the new iPad Mini?
Photo courtesy of: Svilen Milev
The initial reaction to earnings can be drastic, such as what we saw with Google last week. Like you said, though, a buy and hold investor won’t be affected because over time these reactive trading sessions smooth out.
DC @ Young Adult Money recently posted..10 Expenses to Consider When Buying a Home
That it can DC. I think it’s interesting to see the finger pointing going on over the Google debacle.
Earnings reports can be a great way to to judge whether a company is living up to your expectations or not.
For some of the smaller cap companies it can be particularly important to see how much cash they have left in the bank, and what their quarterly cash burn rate is like.
Glen @ Monster Piggy Bank recently posted..Move Out and Rent or Stay with Parents
I totally agree Glen. I also like to see how much debt they have and which way it’s going. If they’re using it entirely to leverage the business it could be a red flag.
I have never heard of earnings season- good to know!
No, I won’t get the ipad mini. I have an old fashioned laptop!!!
Holly@ClubThrifty recently posted..Student Loan Debate: Obama vs. Romney 2012
Same here Holly. We’ve got enough electronics in our house to not have to spend more money.
Interesting post, my knowledge in terms of investing is embarrassing, I really need to grow up and learn more! No, I would never buy and ipad mini or any other ‘i’ product. Even if I won one, it would be on the local classified for sale as fast as possible
Catherine recently posted..Stop Wasting Money On Whitening Toothpaste!
No worries Catherine. We all have to start somewhere. There’s plenty of info available out there and much of it is free. I am not a fan of Apple either and won’t be buying one. But…my wife is a huge Apple fan & we’ll probably be getting here an iPhone 5 in a few months.
I don’t pay too much attention to it. I probably should. I don’t even have an iPad, so probably won’t have a mini either.
Kim@Eyesonthedollar recently posted..Inspired by Malala Yousafzai, 14 Year Old Hero
We won’t have one either Kim. From the looks of it, I’d say you’re probably somewhat of a buy and holder, which would mean it in general is no huge deal.
I didn’t know it was called earnings season. I used to follow closely the foreign exchange calendar with things like country bank rate statement, CPI and GDP but never a particular stock. It can make for some interesting day trades.
Pauline recently posted..Moving abroad: The Check-list
I bet you would with the amount of traveling you do. I bet it does make for some interesting day trades.
I wonder what Facebook is going to do / come up with / reveal for this earnings season to pretty up their image. I have a feeling the iPad mini is going to be released this Christmas to steal away the moment from everyone else
, and of course to boost Apple’s stock prices hehe.
Veronica Hill recently posted..I Am a Monster
That’s a good question Veronica. That thing has been bungled from the beginning so who knows. Yea, I am sure they’ll release sometime in November to get all the Christmas shoppers.
Apple is no dummy. They really use this system to their advantage. I remember last year they had one announcement where they actually doubled their earnings forecast! That did wonders for my stock share price!
My Money Design recently posted..Confessions and Resume Screening Tips from Someone Who Interviews
No they’re not MMD. I bet it did! It did similar wonders for the option I was holding at the time too!
Great explanation! I too had never heard of it before but I can see how it could be exciting for someone that closely watches the market. And no, I am not an Apple fan either.
Tackling Our Debt recently posted..Excellent Work From Home Jobs, Where to Find Them, Part 2
It can be…at least for geeks like me!
I really enjoy earnings season as an investor. It’s fun to watch how the market responds to the changing earnings reports and watch as the stocks rise and fall with the news. I think even buy and hold investors can enjoy the ups and downs of the market.
Weasel recently posted..Should You Rent to Own a Home?
I enjoy watching it as well, there can be a wealth of info available in many of the announcements. Must be the geek in me that likes it.
Will you be providing commentary during this Earnings Season? Now I am curious how stocks which piqued your interest have fared. No iPad Mini here, either, although I am very satisfied with my durable Apple products which were gifts in the past.
Jennifer Lynn @ Broke-Ass Mommy recently posted..How Much Cash Do You Carry?
Oh, I might on a couple that catch my eye. I usually find one or two that cause me to go into my nerdery and come out with some thoughts. But, then again, my wife says I already spend enough time on the computer.
I am going to have to pass on the Mini as well. My Kindle works just fine for what I need it for.
My favorite part about earnings season is all of the doomsayers explaining that this company or that company will end. based on 1 quarter’s trend.
This week I read an article about how Google’s ad sales were down and that now they’ll be the next yahoo.
justin@thefrugalpath recently posted..Choosing Contractors: Cheapest Doesn’t Always Mean Savings
I know. It usually just makes me shake my head. I think I read the same article…it’s just sheer craziness I think.
I’d like an earning year please!
Isn’t the ipad mini just an iphone? lol! I kind of admit I’d love an ipad. One of those purchases I just can’t justify. I’ve already given Apple enough of my hard earned money so far!
Budget & the Beach recently posted..My first VLOG! Being Yourself
Lol!
I think it basically is. I think it’s on between an iPhone & an iPad.
I for one am in the market for an iPad in the next 2 months. I’ll have to give the mini a look, but I heard it won’t have the retina display and will be 2 inches smaller. I already have a number of Mac products, but don’t see the need for an iPad mini – isn’t the iPad small enough?
Jason Clayton | frugal habits recently posted..Five Ways to Help your Kids Learn about Money
I’ve heard the same thing Jason. I won’t be buying one though. We’ll be buying an iPhone for my wife in January, so they’ll be getting enough of our money.
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