Jeff Miller | May 09, 2013 12:07AM ET
As the Q1 '13 earnings season reaches its close, there is a consensus around many conclusions:
The actual reports and the conference calls included plenty of discussion of these factors. Individual stocks gained or lost based upon the market reaction.
The issues are all valid. Investors should be skeptical about earnings, especially about projected growth. I always question whether current results flow from extraordinary measures. Can the success continue?
You also need to beware of biases. In the '99 bubble era" there was a distinct bias toward optimism. Today it seems different. Many CEOs choose not to exude excessive confidence when nearly everyone is worried.
How Should Investors React?
All of the conclusions and questions are good ones. We study every potential stock purchase carefully, and so should every individual investor. If the company report does not verify your reasons for owning the stock, it is time to move on. I use the dog not barking .
If you cannot find an example either, maybe it is time to put this concept to rest.
Reader Challenge
With a little thought, my guess is that readers can think of one or two other market valuation methods that are completely unmentioned during earnings season. I didn't see anyone discussing a company's earnings from ten years ago, but there was plenty of talk about next year.
If you put these misleading ideas to rest, you will be free to join us in finding attractive investments.
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