Earnings Calls 203
Industries Outside Your Comfort Zone
If staying within your comfort zone is such a trusted trading strategy, why do traders and investors actually buy into stocks outside of their comfort zone? In our option, it is due to a: Visionary Mentality.
Someone who is able to step outside of their comfort zone, take a risk on something bold, sees the future before the rest, and succeed - well… those people are remembered in history or at least greatly rewarded for their achievements. Trading is very much inclusive of this statement!
Most of us do not have the electrical engineering background needed to understand the evolution of the electric vehicle; however, that did not stop many from investing in a number of companies in the sector. Many traders to not have the scientific background to fully understand the complexities of clinical trials, data interpretation, or anything involved in making groundbreaking medical breakthroughs; however, that did not stop traders from investing in companies looking to change the medical world. NASA has a very limited employee list that is significantly lower than the number of traders looking to take advantage of the modern space race.
Trading outside your comfort zone is very much, high-risk high-reward. What separates the good traders from the legal gamblers is the ability to de-risk the investment; and what better way than with proper fundamental analysis!
Emotion and Tone Can Go a Long Way
As cliche as this section’s title sounds, the emphasis is on focusing on what you know instead of all the complex numbers, words, and sentences during the call.
Regardless if the subject is high-level scientific research analysis, the development of complex systems and products, or attempts at cutting edge medical breakthroughs, there is always a significant difference between the way good news and bad news is delivered.
It is really hard to sound happy and optimistic as you tell the market for the first time that all the money invested in the company’s revolutionary developments were wasted because two of the trial participants died.
It is really hard to suppress the euphoria and excitement of announcing a buyout valued over 3x current share price, knowing the person delivering the news has a boat load of shares that are going to skyrocket at the end of the sentence.
During the live call, listen less to what you do not understand and try to focus on how all that stuff is being delivered.
You have an unlimited amount of replays available to you after the call - these are generally added to the corporate investor relations page within a few days.
With most things in life, you will find these once-intimidating calls and subjects become repetitive and easy to manage. There are only a limited number of updates a company can provide, and before you know it, you will be asking yourself before the next earnings call if Genome-155B3 was able to successfully splice with AlPHA-4G or if the new Modular BackFulage Combustion Converter was able to magnify the whatever, and so on.
The Financial Review
Similar to the comments made in the previous section, Earnings Calls Section 202, the financial section should be straight forward regardless of industry. Numbers are universal and they tell the same story of success and failure based on the actual results.
Q&A
Echoing the comments above, the questions and answers exchanged between the experts and Executives can be just as complex as the prepared remarks. That said, rely on your intuition of emotion and tone to carry you through the conversations.
Generally speaking, the questions wi
