My investing muse - Should we trade before the earnings?

We do not have "sufficient" information about earnings - revenue, EPS, net profit and market outlook. We are unable to anticipate how the market will treat the news. It is important that we recognise the above. As an investor, it is my due diligence to get as much information as I can.

With this, I find it challenging to predict how the stock price will move even if we are hopeful of favourable earnings. Hope is not a strategy. Given the current macro environment, the risk-reward to go long for companies leans towards disadvantageous.

Quote - Fortune favours the Brave

“Fortune favours the Brave” is a quote that many have come to know. It has some validity but I would like for us to consider the following instead:

“Fortune can favour the Brave but failure awaits the Fools.”

Quote by Neil DeGrasse Tyson about knowing enough

I love the above quote from Mr Neil DeGrasse Tyson.

Over time, it is natural to develop confidence having enjoyed some success, career advancement and recognition. It is good to have self-confidence and live with good self-esteem. However, let us not get ahead of ourselves following some “success”. A track record is no guarantee for future success. “I can be wrong” is such a humbling revelation for me. While we feed our confidence with track records, we should not be living our lives constantly looking in the rearview mirror. Let us avoid being myopic, having tunnel vision and in some cases, deluded as we use our past victories as side blinders.

Being the best yesterday means that we need to work even harder to be the best today.

In an echo chamber, we could set ourselves up to narrow our views and taint our objectivity. I get concerned when we display (passive) aggression towards contrary views.

Quote about Diversity by Alan Barth

Progress is made through a diversity of views. I get uneasy when our reality loses objectivity. Thus, it is good to listen to all sides - bulls, bears or some Beatles in between.

Back to Trading

Coming from a position where “I do not know enough”, I could not make a “calculated” decision before earnings. My confidence needs to come from research instead of hope that the company would deliver.

Thus, I seldom take up position before earnings unless the price is with an adequate margin of safety. Taking up a position without adequate research on the company (to me) feels like gambling. There are better ways to “use or spend” our hard earned money. While I may not have complete information, I seek to have as much information as possible so that I am taking on lesser risks.

The first rule of investing is not to lose money.

Coming to risk/reward, each one of us would have different tolerance. What works for me do not work for another as we have different work experience, learning, investing time horizon, different goals for investing and different expectations coming to risk-reward.

If I were to take up a position, I prefer to do so AFTER the earnings. My profit can be lesser but my risks is lesser too, after I have researched on the company. To see the worth of any business, we need to see value creation & financial statements over a longer period of time. One quarter does not define a company but a track record of years would give me much confidence. In such good businesses, there is room for upside and the strong fundamentals would ensure better chance of survival during market downturns.

Let us do our due diligence before we invest.

@TigerStars

$Microsoft(MSFT)$ $Boeing(BA)$ $Tesla Motors(TSLA)$    

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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  • Kaixiang
    ·01-25
    TOP
    Good article! I have failed trying to guess earnings on 3 occasions so i can totally relate. Luckily those are fundamentally strong stocks that i can hold
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    • KYHBKO
      Thanks for sharing.  all the best
      01-25
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  • Asphen
    ·01-24
    TOP
    in theory no... but it is good for selling options due to high IV
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    • KYHBKO
      thanks for sharing
      01-24
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  • breAkdaWn
    ·01-24
    TOP
    good writing, good reflection, good advice.
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    • KYHBKO
      thank you for your kind words.  all the best for the year of rabbit
      01-24
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  • Bulltrader
    ·01-25
    TOP
    Agreed. Earning play.
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    • KYHBKO
      thank u
      01-25
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  • BenjiFuji
    ·01-25
    TOP
    Aligned, thanks [Grin]
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    • BenjiFuji
      You too!
      01-25
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    • KYHBKO
      all the best
      01-25
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  • blue sky
    ·01-25
    TOP
    赚少比亏损开心。 [微笑]
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    • KYHBKO
      well said
      01-25
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  • Road1Warrior
    ·01-25
    TOP
    i sell lousy at a profit when I can
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    • KYHBKO
      so long we make money
      01-25
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  • i try not to
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    • KYHBKO
      it is good attempt on your part
      01-28
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  • Helen1229
    ·01-25
    👍🏻👍🏻👍🏻👍🏻👍🏻👍🏻
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  • boonk
    ·01-25
    Sell on news
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  • 🙏🙏
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  • Johnston
    ·01-26
    Ok
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  • Leowtc
    ·01-26
    Ok
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  • ethanlam
    ·01-26
    ok
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  • AlanChong
    ·01-26
    Ok
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  • Jason_LSE
    ·01-25
    k
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  • mrzhuge
    ·01-25
    huhu
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  • Clarewu
    ·01-25
    ok
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  • cowsmile
    ·01-25
    Bbv
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  • Pauline122
    ·01-25
    Ok
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