Since we're smack dab into high gear with EARNINGS season (happens every quarter)....
How many of you have come to the realization that EARNINGS MATTER when companies report.
Two things matter the most to your holdings -- EARNINGS and FORWARD GUIDANCE. In other words --- is the company growing (more sales) and better profit margins --- AND what they think they're going to do in the future. Miss earnings -- or give poopie forward guidance and they get taken to the woodshed.
This is where the P/E ratio comes in to play. P (price) to E (earnings)... P what the stock price is --- divided by E earnings.
When you have a HIGH P/E -- people are betting that the company will grow into the stock price... Own a high P/E company that misses -- or gives poopie forward guidance (or both) and it's Kattie bar the door.... the price comes down BIG TIME.
People ask me all the time about P/E. It's not a metric I use because for the most part the P/E's on the companies I own are "in line"... Since they're dividend paying companies - they're really not the big "growth" companies. Big growth companies are Amazon (AMZN) P/E 483 - Tesla (TSLA) P/E 0 because it has no earnings (I own it just because it's cars - and they're cool) - NetFlix (NFLX) P/E 125 etc
Versus -- Altria (MO) P/E 17 -- AT&T (T) P/E 10 -- British Petroleum Prudhoe Bay Trust (BPT) P/E 9.5
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