Investment Strategy: The Quarterly Earnings

Over the last couple of months, I had been experimenting with various stock investment strategies.

The plan is to compile a list of arsenals to attack the market and to maximize returns. Eventually, I will have enough tools to put it all together into a little book of investing of my own.

These strategies are mostly technical but I will consider some fundamental investing as well. I would like to share them on my blog for my personal record keeping.

With that being said, I have found success in sniping of the quarterly earnings report for quick profit. These are the steps that I took using this strategy:

The stock market is unpredictable

Although I have profited from 6 out of my last 7 purchases through this method, it is something that still can not be guaranteed. Most stock investments come with a certain degree of risk and quite frankly, GICs do not interest me. 🙂

I had made $841 last month using this method and I have fallen in love with playing on the quarterly earnings reports. Trust me when I say that I am not hating but I don’t think I’ve made this much in dividends in all of 2015!

With my aggressive financial plan, dividends are way too slow me for me at the moment. That is why I had decided to look into other ways to invest in the stock market.

Selecting potential stock candidates

To capitalize on the quarterly earnings report, the first step would be to figure out which companies will be reporting in the near future.

To get this information, I like to visit the website Earnings Whispers. They put all the earnings report into a nice little calendar that is easy to follow. Additionally, if you follow them on Twitter, they will send you a calendar of all the major companies reporting earnings every Sunday for the week!

earnings whisper twitter

After determining which companies will be reporting earnings, I would select some on the list that catches my eye. Most of the time it would be the companies that I already know but I do look into the ones that are not so well known as well.

I would then enter these companies on Nasdaq.com and look at the EPS estimates for the quarter. From my personal experience, these estimates are accurate most of the time in terms of determining either a positive or negative EPS.

Although the numbers may not be accurate, they do provide me with a good sense of whether the company would report an EPS higher or lower than the same quarter from last year.

nasdaq earnings report

Should the company is estimated to report an increase in EPS, I would then look at the chart shown on the site to see if the company has a good track record of meeting the estimates. If the company consistently reports lower than the estimates, I would move on to the next stock. However, if it has beaten estimates every quarter in the past year, I would consider buying.

Stocks that consistently report positive surprises (beating the estimates) is also something that I will consider before making the purchase.

Initializing a position

Once I have selected a stock to purchase, I will next consider when it would be best to go in on it.

If it is public knowledge and all over the news (usually through a quick Google search) that the stock is expected to beat estimates, I would go in a couple of days early before the release to catch the ride of all the hype. Otherwise, I would just go in on the close of the day before the release.

Determining when to sell

As for selling my position, there are two options that I could take. Seeing as how this strategy is generally a short-term investment, I would either sell the next day at the open price or hold out for a couple of days and wait for the momentum to die down.

If all goes well, this strategy could return a percent of somewhere between 4% to 8% in most cases. However, there are times when even a good read could go south. Like I mentioned earlier, I profited in 6 of my last 7 purchases using this technique. Unfortunately, my 7th purchase (Disney) took quite a nose dive after their last report. Since then, I’ve been trying to experiment and discover other technical investment strategies.

Anyhow, this strategy has worked well for me and I will continue to use it in the future. Do you have any thoughts on investing near the quarterly earnings reports? I’d love to hear from you!

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4 Responses to “Investment Strategy: The Quarterly Earnings”
  1. DividendsDownUnder July 6, 2016
    • Jeff July 7, 2016
      • akash February 11, 2017
        • Jeff February 11, 2017

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