Posted by on Jul 16, 2018 in Articles & Advice, Blog, Columns, Featured |

Image Credit: Alex Nabaum

 

By Jason Zweig |  July 13, 2018 11:00 am ET

 


Addicts often have to take heavier doses to get the same thrill as time passes. The same is true in aging bull markets: Companies need to report bigger and bigger earnings to get the same rise out of investors.

What matters to a stock price is not how much profit the company earns, but how much it earns relative to what the market was expecting. In what’s called a positive earnings surprise, a company reports a profit greater than analysts are forecasting. In a negative earnings surprise, the company announces a profit below analysts’ expectations. (Money-losing companies can also surprise, by doing more or less badly than expected.)….

 

To read the rest of the column: 

The Wall Street Journal, https://blogs.wsj.com/moneybeat/2018/07/13/earnings-surprises-the-stock-markets-worst-kept-secret/

 

 

 

For further reading:

Books:

Jason Zweig, Your Money and Your Brain

Jason Zweig, The Devil’s Financial Dictionary

Benjamin Graham, The Intelligent Investor

Jason Zweig, The Little Book of Safe Money

 

 

Articles:

Why You Shouldn’t Buy Those Quarterly Earnings Surprises

The Right Way to Handle a Surprise

Profits Came in Lower Than Expected? Hip, Hip, Hooray!

David Veenman and Patrick Verwijmeren, “Do Investors Fully Unravel Persistent Pessimism in Analysts’ Earnings Forecasts?”