Conference Calls: The Good, the Bad, the Misunderstood

To the uninitiated, it looked like some profit-taking . Yet the 7% premarket selloff was more than just profit-taking. It was an implosion. But what caused it?

To begin with, Costco made its new highs and broke out technically in the days leading up to its earnings release. This attracted momentum investors to the stock.

However, momentum investors will flee at the first sign of trouble. All that's usually needed is a little push. Thanks to the ever-pervasive hedge fund community, Costco got that push. Rumors of disappointing gross margins were being spread rapidly. But this negativity did not align with reality. All that a Costco investor needed to have was some patience to wait a few hours to listen to management on the conference call.

On the Dec. 13 call, Costco management provided a detailed analysis of gross margins by product, department and reporting periods. Looking forward, the company provided a positive outlook (or "guidance") for future gross margin growth.

However, Costco's naysayers shot first and asked questions later (i.e., they sold immediately). And that was a mistake. Costco closed at $70.19 the day before the earnings release, traded as low as $65.10 early the day of the earnings release, and closed at $68.54 that day. Subsequent to that day, shares of Costco have traded higher. (See No. 1 in "Five Missteps to Avoid During Season.")

You can listen to an archive of this call on TheStreet.com -- click here.

Good: Apple, Research In Motion and Dick's Sporting Goods

It's hard to say which one of last quarter's good conference calls can be regarded as the best (because there are several really good ones). However, three calls do stand out in my mind: Apple AAPL, Research In Motion RIMM and Dick's Sporting Goods DKS. All of these companies' quarterly reports and earnings conference calls delivered affirmation to the bulls .

Here a few characteristics that each of these calls shared:

• Reported better-than-expected results for the most recent quarter.
• Provided robust guidance for the upcoming quarter.
• Quelled any concerns regarding issues that may have lingered with the naysayers, particularly that these companies would be adversely affected by a slowing consumer or economy.
• Demonstrated opportunities for continued future growth.
• Caught the short-sellers off guard, with stocks spiking significantly the day after the earnings announcements.