How to make sense of earnings: Stocks in Translation

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About 24% of stocks have outperformed the S&P 500 (^GSPC) over the past two decades, according to Tkr.co. With the tech sector largely reporting better-than-...

) over the past two decades, according to Tkr.co. With the tech sector largely reporting better-than-expected results thanks to the generative AI hype, the index has seen a year of record highs. But do earnings paint a full picture of a company? And what does it mean for the overall economy?to discuss how investors should digest earnings.

Um But you know, I don't think price alone is what, you know, investors should be thinking about because at the end of the day, over time over the long run, at least price seems to be driven by the fundamentals and most importantly earnings.Yeah, and I just want to differentiate, you're talking about market prices and prices of stocks are really the domain of technical analysis and that's really what my specialty is.But I mean, how do you look at it for sure.

I think most people do, but it's really about earnings and maybe just kind of break down the import that if you don't have earnings growth eventually, you're just not going to see stock market returns.Yeah, because, you know, the stock price is going to be sort of in one way or another, uh, related to where earnings are.

You know, when we look at earnings, um, they can, the various metrics can change by a company according to their industry. But he also knows that that standard requires them to report these massive swings in their equity portfolio where, you know, on paper, the value of the company and the value of their investments might be going up and down.So they have a lot of unrealized gains and unrealized losses in a given year.

Um So, yeah, I don't think there's really a, a great way to oversimplify or, or to simplify it in a way that's super intuitive. Um, more recently it looks like growth has been decelerating while, you know, stuff like retail, like all these things we just talked about might still be growing, the rate at which they're growing is sort of cooling down a little bit.

All right, we are back and if you're keeping score here, we already went through our phrase of the day here.So we are moving on to the episode. So, you know, the takeaway ends up being that, you know, unless you're convinced that you can have some kind of advantage in this market, the move ends up becoming, you know, buying the entire index because you're also going to get exposure to those winners that are going to drive the entire market higher.Like obviously, it means a stock does better than the whole of the index.

Um, it is a popular practice for, for various Wall Street firms to have a target for the S and P 500 as an index.Um, but, you know, I think something that, you know, you learn over time after paying attention to this for a little while is that a lot of times those price targets are very, um, are off.I, I mean, there's a whole, there's a whole game to analyst ratings in and of itself.

And Sam today we're, we're looking at two different Warren Buffett quotes and we want your opinion about which one deliver delivers a better, more useful message to investors.Number one, Warren Buffett, it's far better to buy a wonderful company at a fair price than a company at a wonderful price.So, two different ways of looking at it there.Like, you know, that's very intuitive and value is what you get.

Um, you know, I write for an audience that I, I think that's, that's pretty much it, you know, longer term thinkings, you know, people who, uh, do see headlines every day but they wanna know what those headlines mean in the context of them planning for retirement in 20 years. I mean, I think, I think it's, it's less about the understanding and more about, um, sort of separating material news versus the noise and not to say that there's any kind of, you know, news that isn't newsworthy, but there might be news and there might be developments that might not be material for someone who's thinking in the long run, you know, kind of like what we were talking about earlier about, you know, what, whether or not a company beats or misses earnings...

 

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