• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Taking a Longer View of Earnings Season

Value investors look for good entry points, rather than sweating every penny.
By TIM MELVIN Aug 01, 2014 | 02:00 PM EDT
Stocks quotes in this article: RFP, MT, CCG, HERO, WMAR

I made the mistake this morning of calling a good friend who is much more of an active trader than I. I got a quick response of "Waiting on payroll number. Call you back." And the phone was slammed down.

This scenario plays out all the time, as I forget how my trader friends are so focused on the minute-by-minute stuff and rudely call them to discuss matters at inopportune times. I had a mild interest is the payroll numbers this morning, but it was of more of an intellectual interest than anything else. None of my positions would be affected by the number in a meaningful way. I have parsed the report and will do a more in-depth read later on, but I was out walking the dog and communing with the local gators when the number was actually released.

This "Can't talk now, waiting for the numbers" phenomenon is more enhanced during earnings season. My trader buddies are so intensely focused on each and every number, as they have entered convoluted, nine-legged trades that are structured around the releases or have made bets that their guess about the analysts' guess is better than everyone else's. One options trader of my acquaintance has to go to a chiropractor every week, because he spends so much time hunched over the keyboard with his nose on the screen before and after the open and close every day as the reports come across the screen. Given that even the best of traders are not doing much better than I am over time, this seems like an awful lot of work and tension to me.

During earnings season, I track what is going on, and I spend a good deal of time reading reports, releases and 10Q filings, but there is no urgency to the process. I am more concerned about where the price of my stocks will be in four years than where they will be at the close of the day or month. The quarterly information is just a snapshot, much like the progress reports my 11-year-old brings home during the school year. It is very rare for a single quarter to show enough deterioration in the company's financial position to shake me out of the position, or enough improvement to send the stock price over my estimate of full value. It does happen, but it is rare.

My fondest hope each earnings season is that we get one of the massive blowups that put quality assets on sale at stupid prices. We saw that last year with some shippers such as StealthGas (GASS) and Star Bulk Carriers (SBLK), and earlier this year with Boardwalk Pipeline Partners (BWP), but so far this season we have had no really dramatic inventory-creation events. We have had some mildly disappointing reports that have caused enough lemming-like selling to create opportunities to initiate or accumulate additional shares of a few favorites.

Pretty much all of the natural resources and material names have had weak earnings reports, and the global economic recovery continues to merely sputter along. Resolute Forest Products (RFP) has slipped on the heels of earnings and is now back at just about half of book value. Arcelor Mittal (MT) disappointed the short-termers this morning and has pulled back this month to levels that offer a good entry point at less than 60% of book value. I thought Swift Energy (SFY) had a great report, but the market sold it off anyway, and the stock is trading at just 50% of book right now. Hercules Offshore (HERO) had a horrible report, and the stock is now at less than 70% of book value.

It is not just the materials stocks that are giving you a chance to scale into some cheap stocks right now. The market didn't really care much for the report form Campus Crest Communities (CCG) either, and the stock is back down to 76% of book with an 8.5% dividend yield. West Marine (WMAR) had a slower-than-expected start to boating season, and the stock is back down to just 76% of book value.

So far, we have had no huge blowups this earnings season that have created new opportunities for deep value types. However, some old favorites have slipped back down to levels where those with an eye on the stock price in five years or so instead of this afternoon's close might want to initiate or add to their positions. While my trading-oriented friends scramble and stress to make their money a penny or two at a time, I am more content to sit back and let value and time provide me with long-term returns that are measured in multiples of the current price.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Melvin was long RFP, MT, CCG, HERO and WMAR.

TAGS: Investing | U.S. Equity | Stocks

More from Investing

Let's Shine a Light on Lucid Motors as It Slides Downhill

Brad Ginesin
Jul 2, 2022 1:00 PM EDT

LCID's market cap has been deflated, so is it now a bargain, or can it slip further?

Stop Wishing, Hoping and Praying and Take Control of Your Investing

James "Rev Shark" DePorre
Jul 2, 2022 10:00 AM EDT

The most powerful thing an investor can do is embrace the idea that they don't know what the future holds.

If You've Got Time, These Three Dividend Aristocrats Should Pay Off

Bob Ciura
Jul 2, 2022 7:30 AM EDT

There high-growth dividend stocks will be here over the long haul.

Welcome to Second Semester on Wall Street, Here's How to Make the Grade

Jim Collins
Jul 1, 2022 4:36 PM EDT

Think you can own big tech? You might just get an 'F' for that. Here's what will get you on the other side of this year.

We Got a Break, but the Heat Is Still On

James "Rev Shark" DePorre
Jul 1, 2022 4:22 PM EDT

A limited rally cooled some of the negativity on the market, but guess what's going to hit the fan soon?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • 04:41 PM EDT PAUL PRICE

    First-Half Results - Putrid; Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 mark...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login