How Should You Invest During Earnings Season?

Earnings season is now in full swing, and it can be a volatile time for many stocks. In this Fool Live video clip, recorded on July 14, Fool.com contributors Brian Withers, Toby Bordelon, and Matt Frankel, CFP discuss how they approach earnings season in their own stock portfolios.

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Brian Withers: JK says, “How do you guys go about buying and selling during earnings season?” I guess I would just answer that holistically and say, “Not really any differently than I would buying and selling at any other time.” The other piece that I would try to put earnings and perspective is thinking about them as a report card that your kid might bring home. It’s the second half of the six grade and the report card comes back and it’s either great or it’s either lousy or some of it’s good and one of the grades is not. How do you look at that in perspective of what’s your sixth grader going to be when they grow up and graduate from high school and hopefully go to college? This one report card is probably not a defining moment. Think about earnings is just that checkpoint. Matt, do you have any thoughts on earnings season?

Matt Frankel: Well, I’ll just piggyback on that and say that I love investing in companies when they drop after earnings for a short-term reason. I just mentioned, Bank of America (NYSE: BAC) the primary reason that show was because interest rates disappointed and because of one quarter of fixed-income trading, which is all over the place, it’s unpredictable. One quarter was disappointing. Those are situations where when the stock falls after that, I love to invest. Now, if the stock falls because growth is slowing or the CEO is leaving or something like that, that’s another story, but when a stock falls because of nothing long term. That’s what I love to pounce on opportunities.

Toby Bordelon: I rarely buy and sell stocks on earnings by digital out of option trading off of earnings, for the reason that managers alluded to you. When you think it’s a temporary drop, there can be some opportunity there. That seems to be my approach, but as far as my long-term stock positions, I like to use it just as a way to reflect. Look at things a little more deeply, make sure that these are still on track, but I’m more of an annual report guy in terms of what I pay attention to.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Brian Withers has no position in any of the stocks mentioned. Matthew Frankel, CFP owns shares of Bank of America. Toby Bordelon has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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