Harley-Davidson, Inc. (HOG), Hi-Tech Pharmacal Co. (HITK): Four Rules to Follow This Earnings Season

Page 1 of 2

Alcoa unofficially kicked off earnings season on Monday and traded flat for most of Tuesday after a mixed quarter. Now, we prepare for a volatile six weeks, as most of the S&P 500 will report their quarterly reports during this period.

Harley-Davidson, Inc. (NYSE:HOG)

While you may hold a stock that will rally 15% after reporting earnings, there will be many who are prepared to chase gains, buy before earnings, and will overreact to initial top and bottom line numbers. In this piece, with earnings season expected to be particularly unpredictable, I am giving you four rules to follow.

Rule #1 Read & Listen!

This might sound like common sense, but far too often retail investors get trapped with the initial volatility following earnings. But here’s the thing, sometimes the market will get it wrong, which will create value–or a value trap.

Therefore, the first and most important rule is to actually take the time to read the quarterly report. Then, after your initial impressions, listen to the conference call and the Q&A with analysts. This conference call will be very important, as the Q&A will be the basis for future upgrades and or downgrades.

Rule #2 Be Patient

If you follow Rule #1 then chances are you will be patient. Because after all, a stock may trade for hours before the conference call is complete.

There are countless good examples of why this is important; most recently you can look at Hi-Tech Pharmacal Co. (NASDAQ:HITK). The healthcare company announced Q4 earnings before the market opened on Tuesday, missed on both the top and bottom line, and traded lower by 7.3% in the premarket.

However, its conference call began at 10:00 am ET, and its stock slowly begun to creep higher from $31.50 to over $35.00. The reason was because of the upbeat tone on the call, and the outlook that prices for its Fluticasone Propionate nasal spray product may be stabilizing. Also, additional details of a $15.5 million settlement that negatively affected its earnings were discussed.

The moral of the story: Use earnings to your advantage to capitalize on the initial, and often illogical, behavior. More times than not, the first 30 minutes of trade do not carry throughout the day.

Rule # 3 Seek “HOGs”

In my book Taking Charge With Value Investing (McGraw-Hill, 2013), as I lay out 20 rules for earnings, I discuss what I call “The HOG Effect”.

The HOG effect refers to an investment I made in Harley-Davidson, Inc. (NYSE:HOG) back in 2011. Harley-Davidson, Inc. (NYSE:HOG) announced earnings in October 2011 and traded lower by 7%, despite beating expectations.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!