While the day traders go crazy chasing all the big, gaping stocks this earnings season there are still people that are longer term investors who will be looking for the next great stock to add to their portfolio. If this sounds like you, should you be looking to add stocks before they announce earnings, or is it best to wait until sometime after?
To save you the suspense, most long term investors are not looking to take the gamble before the earnings move. Since no one knows exactly how the market will respond to an individual companies earnings announcement, the long term investor is more likely to wait until after the move. That is not to say that they will be looking to buy on earnings day necessarily.
Think of the long term investor as being in "watch list mode". Most long term investors will be looking for a company that has good earnings and good projections going forward. What generally happens when a company announces an earnings beat, and comments that they think the future will be even better? The stock tends to shoot higher on the news. While this may be good news, it's not necessarily a reason to buy. If it shoots up 10%, that's great, but it may be wise to try and wait for a small discount before entering.
Making a list of stocks that have shown good earnings results, and that you would be interested in should they pullback a little is a great way to navigate the earnings season. You may end up with a list of a few good candidates and now all you have to do is check in to see if they have pulled back. Unfortunately some will continue to push higher, but look at Cisco
