Investing 102

[WSSix]

Well, Halliburton has been hiring like crazy and I stay busy as crap most of the time, so we better report good earnings or else I'm going to want to know whose been spending all the money I bring in from the jobs I do, lol.

[billscamaros]

Earnings are announced every quarter, right? Are the earnings announced this week of greater significance than those announced throughout the rest of the year?

And the earnings that are announced this week set the tone for the dividends that are paid at the end of this quarter?

[GregWeld]

Earnings are every quarter -- but not all companies run on a calendar year... so really - there's an earnings report just about every day from "somebody"...

What earnings do is give you a peek into how things are going - in the company - and in the SECTOR as well.... You might own FORD stock - and pay attention to GM earnings... because they may say things that are indicative of how things are going overall for sales etc...

This is a broad based generalization of course - but if several big companies come out and report good sales and profits and have good things to say about going forward - then this can lift the market overall... and of course the reverse can happen.

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Dividends are set per quarter... and are indicative of how the company is doing. Doing really well and feel good about the future of their earnings they may choose to increase the dividend. That is a really good indicator because they are saying that their income is growing enough to support that payout.

COMPANIES are loathe to reduce the dividend....because it says "we're not doing so hot"...

It's really not much different than a persons personal situation.... nobody wants to be in a Ferrari and then have to trade down to a Yugo... and the reverse is true as well -- IF a person feels good about their future earnings - they're likely to buy a better car (pay a higher dividend).

[GregWeld]

Originally Posted by WSSix

Well, Halliburton has been hiring like crazy and I stay busy as crap most of the time, so we better report good earnings or else I'm going to want to know whose been spending all the money I bring in from the jobs I do, lol.

Keep up the good work! Halliburton reported good numbers and I was looking for a quote from you in there somewhere...

[GregWeld]

So here's what I was saying about "THE FUTURE" as it pertains to a companies quarterly reports.... and these are - to me - far more important than what they did "this quarter". Because I'm an INVESTOR I want to have a feel for how my dividend is going to be paid going forward... that's what I'm buying - that dividend (earnings) stream...

So HALIBURTON comes out and says this quarter was good - they beat by a penny -- but then say - but going forward we may be impacted because of blah blah blah... Some of that talk is CYA - but some of it is right on the money because they are seeing something they don't like - so expect HAL to open down today and maybe trend down going forward


Here's a cut and paste...


Halliburton Co, the world's second-largest oilfield services company, posted a higher-than-expected quarterly profit and said its revenues would grow faster than oil and gas companies would drill this year.

Still, the company said its costs were rising, and that the industry shift away from dry gas and toward oil and natural gas liquids resources would hit its first-quarter earnings.

"We believe that reduced productivity and increased costs resulting from this relocation will be a short-term disruption for us and that the impact we saw in the fourth quarter will continue into 2012," Chairman and Chief Executive Dave Lesar said in a statement.

[Sieg]

HAL down 3.95% in the first five minutes.........

[GregWeld]

So let's just continue the "102" version of this thread....

Here's why EARNINGS are important -- but those FORWARD looking statements are even MORE IMPORTANT....

Let's continue to use Halliburton as todays example....

They beat on the earnings number - but made that caveat that going forward earnings might be impacted negatively...

When you couple this with a 1.02% dividend... so you don't have that nice "pay me while I wait for things to turn around"... "support level"... suddenly there's more sellers than buyers and the stock price declines.

IF --- it paid a 5% dividend - my guess is the stock would have hardly budged... They didn't say the business stunk - they just said it may have some impact yet they still managed to beat the earnings estimate - so it couldn't be "that bad"... But this is a stock that NEEDS that stock price GROWTH component - and if that's not there to offset that low dividend - then you get what you're seeing today... a decline.

Now -- if you're listening to the talking heads -- then you'll hear the words "it'll need some kind of CATALYST going forward". What they're saying is in layman's terms -- it will need a big business turnaround - or some big new oil field discovery or similar to get it going UP again. There will have to be some big news that will point to some event to get the GROWTH back in the stock price.

[GregWeld]

Since we're in "earnings season" --- I thought I might go out on a limb here and try to keep this thread interesting and make it a little "FUN" for you guys (at my expense - of course).


We own 160,000+ shares of EMC..... Okay - get off your calculators - and I don't own it at ZERO - so no - the math is not going to give you much indication of my profit or loss... for all you know - I have a loss in the stock (the good news is I DO NOT)

EMC reports earnings BEFORE the bell tomorrow (23rd).... let's see what happens to me but let's also use this example for a little "lesson". The lesson is the "law of large numbers".

What happens when you have positions like this -- regardless of the size -- size is relative - and it is why you need to be DIVERSIFIED... THIS IS THE "the law of large numbers". The number of shares multiplied by the share gain or loss - turns into "a large number".

So for INVESTING 102 --- I preach buying DOLLAR AMOUNTS rather than share amounts... because it is easier for you to see and keep track of - it's apparent when $1000 goes to $1250 or down to $900... But what happens is, if you have 500 shares of one stock and only 50 of another - that 500 shares becomes YOUR law of large numbers... a .50 swing gets multiplied by the 500 and becomes a real gorilla (up or down) So you need to be AWARE of that.

Because of prices (share cost) it's almost impossible to balance out an account in the number of shares... and maintain that 5% rule and have diversity. One stock costs $10 so a $500 investment gets you a bunch another stock is $50 a share will get you far less for the same $500 --- but a MOVE in the $10 shares can have MORE EFFECT on your account!

I hope this makes sense.


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WARNING HERE -- I am not allowed to trade EMC because we are considered "INSIDERS" -- as such I have no knowledge to share with ANYONE whether it will be good bad or indifferent...

[GregWeld]

BTW --- I think this thread holds interest because it's like our car builds -- we all get to live AND LEARN vicariously watching these cars go together step by step. It's so much more fun than just going to a car show and seeing a completed car. SO it is in that light that I've shared way too much personal info -- but I think it will HELP people more - and they'll be more interested and learn more when done this way. This is why I've shared my thought process more than just Do this don't do that. It's the thought process that is what you need to "get into". It's like fab work on a car - no two are alike - and it takes seeing someone come up with a solution that might kick up a solution for your own build... something "similar" but twisted to meet your needs.

Hope that makes sense....