The market is in wait-and-see mode in front of tonight's Intel (INTC - commentary - Cramer's Take) report. If it wasn't for another ugly pounding of oil, it would be painfully slow today. We do have some pockets of momentum, but to a great degree, any buys at this juncture in the technology sector are a bet on Intel. Some folks like to play that game, but I'm not one of them.
In my early days of trading I was inclined to bet on earnings reports at times. The one thing we know for sure about earnings is that they are likely to produce some movement. Unfortunately, it usually turns out to be nothing more than a bet on a coin flip. Although we all like to think we have some sort of special insight into what will happen when a company reports, we generally are fooling ourselves.
If it really were possible to find out in advance how a report will turn out, then the big funds with the best research would be the big winners. Sometimes they do indeed have some special insight, but if they buy then, they tend to drive up the stock into the report and price in the news prematurely.
I have found that I tend to fare much better if I buy after the earnings news is out rather than before. There usually still are good entry points following a strong report, and the risk is greatly decreased. You might miss out on catching the big move, but you also miss out on the ugly surprises. Some of my best trades have been in stocks that I have bought after their reports. It might not get the adrenalin flowing the same way that buying in front of earnings does, but excitement is what drives gamblers. Pros prefer good odds.
At the time of publication, De Porre had no positions in stocks mentioned, although holdings can change at any time.
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Rev Shark Blog Measuring the Market's Great Expectations 1/16/2007 8:08 AM EST No matter the overall tone of the market, there are always ways to play individual stocks.
James "Rev Shark" DePorre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.
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