In the thick of earnings season, it's too easy to make a gut decision on a stock based on huge moves in either direction.
The problem? More often than not, an earnings release doesn't tell the whole story. The true color of an earnings report normally emerges during a company's earnings call.
In a recent column on Real Money, Jim Cramer pointed out the case of Texas Instruments (TXN) - Get Report , which reported after the bell on July 23. The chipmaker reported strong earnings, but there was a caveat buried in the call. Cramer wrote:
If you listened to the conference call, though, which so few do, you would know that business is anything but strong.
The company started the session by saying that revenue were down 9% this quarter because of the "broad-based weakness" that's out there. Then management talked about how their core business of analog revenue -- think about some of the most basic uses of chips, such as sensors -- was down 6%.
So how do you avoid making emotional decisions on a stock move? Catch Cramer's advice in the video above.
Hint: Do your homework, but also keep an eye on the company's past.