Quarterly Numbers- How much to look into?

Investing Strategies
1

We are into yet another quarterly result season.

What has been bothering me off-late is How much to look into these Quarterly Numbers?

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One one side, I think- Being long term investors, it shouldn’t bother me too much. A one or two quarter hiccups shouldn’t worry someone who is bullish on long term performance of the business.

But on the other side, I think- Quarterly numbers are an indicator of where the company is heading. So, they shouldn’t be ignored.

And finally there is another thought. Assuming I am bullish on the long term prospects, but this quarter is not up to the mark. So, it would be financially better to sell the stock ASAP & come back to it after good numbers.

And similarly, a stock should be bought after good quarterly numbers.

If a stock is selling at 15-20 PE & it shows a PAT/ Sales de-growth YoY, then in next 3 months it can come down to 10-15 PE. No?

And if a stock is selling at 3-5 PE & it shows a PAT/Sales growth, then it can improve PE to 3-5. No?

For example- Immediately after great Q4 results, Avanti Feeds was available at 130 Rs. & before next result it was selling at 180/-. So, someone could have fetched about 40% return in one quarter without any result. May be if someone buysPI Ind today at 190/-, he/she can get decent returns before Q3 results.

On the other hand, for stocks like V-guard, Somany EPS has fallen this quarter.

So, wouldn’t it be less risky to just sell them now (irrespective of my long term views on the business) & come back after good quarter or just before the good quarter (if I can estimate that)?

P.S- Wish my portfolio only had stocks which keep growing every quarter like Mayur Uni has done for past 2-3 yrs.

Request others to share their thoughts on this.

2

Jatin

its difficult to generalise a formula for all stocks based on quarterly numbers.

Companies which have earned the faith of marketmen due to consistent results and clear future visibility are often excused the quarterly odd blips… There might be the initial knee jerk correction but these stocks quickly recover lost ground.

But for stocks where there is not too much following the punishment offered in lieu of poor results is often severe.

Another approach is to look specifically for a poor quarter in a company you are confident about for the next year or two and then load up when markets punish such stocks.

regards

hitesh.

3

Thanks Hitesh for your valuable views.

Even that is a very nice strategy- To load up after stock corrects meaningfully after a bad quarter.

But we will come to that 1-2 months later.

Right now, the question is whether to hold or sell bad results ones…

4

Jatin,

If we buy/sell the stock based on quarterly results, are’nt we trading the investments. Instead if we add if it goes down, would it not be a better strategy in the very long term. Its tough to get correct each time and also not sure of many persons who have made money though this strategy.

this is just my personal opinion and could be wrong here.