Unless you're a short-term swing trader or active trader, there's little reason to pay attention to events causing knee-jerk reactions. If you take a look, you will see that most releases have done nothing but elevate investor stress levels.
Long-term investors shouldn't care about a single quarter's results. Watching patterns develop over several quarters is the only way to avoid overconfidence (or "overpessimism"). Active traders can roll in and out of positions at incredible speed because a company's worth doesn't matter. What matters to them is the expectation of price movement and direction today.
If you're a long-term investor, here are the key takeaways from the earnings release. These are the primary points I am focused on and used as influences for my decision to go long.Gross Margin: In Bobbing for Another Apple, I wrote about the naysayers using any metrics they could find including gross margin to "prove" Apple was finished. I pointed out that Apple has higher margins than Nokia (NOK) at 1-2%, Research In Motion (RIMM) at 3-6%, Microsoft (MSFT) at 28-32%, and Sirius XM (SIRI) at 25-26%. If relative margins are so important, why do these companies have greater valuations based on earnings, yet lower operating margins? It doesn't make logical sense (I know, it doesn't need to), but Apple came in at 38.6%. Remember hearing opinions about other smartphones becoming indistinguishable and approaching commodity status? Apple apparently didn't get the memo. Even with competitive pressure from Nokia, Microsoft, and Google's (GOOG) Android, Apple still outshone its peers. But that's not the truly amazing part. More astonishing is that margins may increase, not decrease as many are predicting. The increase in new products and updates Apple launched last quarter clued analysts in on potential margin pressure. Launching products is expensive in terms of capital, human resources, logistics, and marketing. If the desirability of Apple's iProducts continues, fewer launches in the current quarter should result in improving margins. Expectations for Apple are falling faster than a Wisconsin thermometer on a winter night. Watch for a "surprise" jump in margins for our current quarter.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV