The financial health of companies is important to both individual investors and the overall economy. Companies, therefore, disclose important information about their finances, and you can find it in the EDGAR database. The most critical information is released quarterly in the form of 10-Qs.
When investors receive this information, it gives them insight into how well companies are doing and whether or not their stock is a good investment. So, what is the earning season? It is a time when publicly traded companies release their quarterly financial reports. These reports and news help investors get prepared for their future investments.
The details discussed in the earning season can disclose various information about a firm and trends in several industries and the pace of economic growth more extensively. The report released is then compared with analyst estimates from before the earning season to determine whether the company did what it intended to do.
It is important to note that there is no specific time frame for when the earning season is. Some companies might release their reports outside of the season. Generally, it falls between October, July, April, and January.
Companies need to file their 10-Q reports with the SEC within 45 days of the end of their fiscal quarter, so the April-June quarter is the first one that would have to be filed in May. Many companies try to get their releases out before this deadline. Some companies also file an 8-K, a current report that has to be filed whenever there is a material event that could impact a company’s stock price.
Although companies aren’t required to hold a call or webcast to discuss their financials, most do. These events give analysts and investors the chance to ask questions about the report. They also give management the opportunity to explain their financial results.
After the report is released, investors need to read it and understand what it means for their portfolio. Then, they can make informed decisions about whether or not to buy or sell stock in the company.
How the Earning season affects you
During the earning season, the Wallstreet is usually in a frenzy. Large institutional investors are buying and selling stocks based on the news being released. For the everyday investor, it is crucial to stay calm and not let your emotions get in the way of making sound investment decisions. Note that;
The market is more volatile during the earning season
Market volatility can present buying and selling opportunities. You should do your own research and form your own opinions. Herding is a common occurrence during this season, don’t let it get in the way of your investment strategy.
During the earnings season, there will be a lot of news, and it can be challenging to sift through everything. Try to focus on the companies that you are invested in or are interested in investing in. This way, you can make informed decisions about whether or not to buy or sell stock in the company.
Managing your expectations is key
Trading in itself is a risky proposition, and it’s important to remember that even if a company beats earnings estimates, the stock price might not go up. And, if a company misses earnings estimates, the stock price could still go down. So, you need to manage your expectations and not invest more money than you’re comfortable losing.
You need to consult with your financial advisor
If you have a financial advisor, this is a good time to consult with them. They can help you understand what the earning season means for your specific portfolio. They can also advise whether or not to buy or sell stocks in certain companies. And the good thing is that even if you do not have one, you can find a reputable one on different platforms. Be sure that they are legitimate and have a good track record.
Having a plan is crucial
After listening to the news, reading the reports, and consulting with your financial advisor, you need to develop a plan. This way, you know exactly what you’re going to do when the earnings season starts. Your plan should include:
- The companies that you’re interested in
- Your investment goals
- How much money you’re willing to invest
- Your risk tolerance
- Your exit strategy
If you don’t have a plan, you may end up making rash decisions that you regret later. So, if you want to make the right moves, take the time to develop a plan before the earnings season starts.
The Bottom Line
The earnings season can be a volatile time for the stock market. Large institutional investors are buying and selling stocks based on the news being released. As an investor, you need to make investment decisions based on research and proper analysis.