Two things to avoid this earnings season

Diamond hands? Laser eyes? Don’t let them distract you from the main game….

A woman sits on her lounge in front of her laptop looking concerned about the falling Archtis share price

Image source: Getty Images

It’s a crazy-busy day, so I’ll keep this short.

There’s been something like 8 – 12 Motley Fool-recommended companies that have already reported earnings… and the day isn’t done.

And then there’s helping my 8yo son with learning from home, given we’re like the majority of the country — in lockdown.

So, yeah… busy.

We’re diving into today’s announcements.

Understanding what they mean for our companies, and whether they’re on track.

Whether our investment theses are playing out as we expected.

We don’t sweat the small stuff, or the short term.

For the most part, the earnings don’t matter as much as whether our long-term hopes for our company are intact.

Personally, I don’t fret small stumbles.

But I wanted to remind you of two things I’m keeping in mind.

First, when people say ‘Company X has been disappointing’, what they usually mean is ‘I’m disappointed the share price has fallen / hasn’t gone up’.

Which is fine, but has relatively little to do with the company, and a lot to do with investors themselves.

Take Afterpay Ltd (ASX: APT).

Shares went from $40 to $8, to $160 then to $100, then $130. Just in the last 18 months.

But the company just kept doing its thing; signing up both shoppers and retailers.

The ‘I love Afterpay’ and ‘I’m disappointed with Afterpay’ sentiment changes over the last 18 months had almost everything to do with the share price and little to do with the business itself.

I’m not saying you shouldn’t like share price rises, or be disappointed by falls. But it’s more likely to be a reflection on investor sentiment — the ‘animal spirits’ that lead to fear and greed — rather than the company itself.

Remember, in the short term, the market is a voting machine, but in the long run it’s a weighing machine, as Warren Buffett says.

So many people are tempted to make decisions based on recent share price movements.


Look at the business fundamentals, including the future prospects.

Look at the current price.

Then buy (or sell) on that basis — not whether the crowd is disappointed or excited by a company’s recent share price moves.

I’ve been around this investing caper for a couple of decades, the last 10 years professionally here at The Motley Fool.

I know most of the medium and large ASX companies. Many of the small ones, too.

But I’ve gotta confess, I don’t know as much as I’d like to about all of them

The good news for me — and you — is that I don’t have to, because I work with a sensational team of investors, meaning that, as a group, we cover a lot of ground.

And second — and kinda related — don’t get carried away.

The stock market is increasingly being treated as a social media game, full of ‘memes’ and jargon that the cool kids love.

Maybe it’s a hangover from Bitcoin (CRYPTO: BTC).

Maybe it’s the inevitable end result of social media.

I have no idea.

But I know it’s dangerous.

Joke cryptocurrencies are being hyped and dismissed, even by people who should know better.

Terms like ‘diamond hands’, ‘laser eyes’, ‘apes’ and others are becoming part of how some people choose to talk about companies and investing.

In short, a small but vocal group of people are treating this all like a bad Looney Tunes cartoon.

It’s a free world, of course.

They can do what they like (within reason).

So can you.

But please, don’t.

If you have nothing better to do with your money than light it on fire playing silly meme games, give it to charity instead, where it can do some real good.

Yes, I’m kidding.

But not by much.

Meme games can be fun, I guess.

If you’re into that sort of thing.

But they’re unlikely to make you money.

And they’re not, in any actual sense, ‘investing’.

If you must, play meme stocks with the money you’d otherwise use to buy computer games. Or a Netflix Inc (NASDAQ: NFLX) subscription.

But here’s the biggest drawback of playing with ‘meme’ stocks: It is a massive mental distraction.

It can impact the way you think about companies. About the market. About investing.

It can tempt you into bad choices. And, as we know, choices can quickly become habits.

Tying the threads together, I guess I’m trying to remind you that we only have so much time, and so much attention we can devote to attention.

We can let ourselves be distracted, paying attention to the ‘soap operas’, the narks and the cynics.

Or we can remember what counts.

Sure, have your fun.

Just don’t confuse it with investing, or it could cost you.

Fool on!

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Bitcoin, and Netflix. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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