An Earnings Road Map to Buried Treasure

I have stressed time and time again the importance of earnings reports and conference calls. I've created a beginner's guide to earnings calls and discussed some common mistakes that investors make when processing them. I've also examined some good, bad and misunderstood earnings calls, and I've provided tips for identifying their deceptive and confusing aspects .

Now I want to point out another aspect of earnings calls, which I call "earnings Easter eggs." Earnings Easter eggs are the comments or throwaway lines during the middle of an earnings call that often go unnoticed. They might not be directly relevant to the company's operations or quarterly results, but they can provide insight into broader issues that impact a specific sector or perhaps the entire economy. You can use these Easter eggs to help craft a trade or investment.

Here are some examples of the types of information you should look for:

Commodity or other input costs changes

Regulatory changes

Tax laws changes

Weather or environmental factors

Here are some earnings Easter eggs that I've come across during this earnings season.

First was McDonald's(MCD). The purveyor of the Big Mac mentioned that the company expects to increase sales in France after the French government lowered the value added tax for restaurant diners.

Certainly, McDonald's stands to benefit from this news, but we need to take this information one step further. This reduction in taxes will have a significant impact on the French consumer and I believe in the broader sense the French market. As you cannot directly buy the French Stock Index, the CAC 40, then I would suggest buying the iShares MSCI France(EWQ). I think our own government could take a page from the French in terms of consumer taxation and nuclear energy, but let's leave that discussion for another time and place.