This is the summary of Episode 36 of our Roaming Returns Podcast.
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Podcast Summary
Earnings Reports
We’re almost done with Q4’s Earnings Season. Earnings season is when companies report their metrics for the previous quarter.
There’s two components of earnings. There’s the stuff that gets reported for public sentiment and the stuff they have to report to the SEC (usually on a 10-Q or 10-K Form, which are super dry/boring).
Companies usually try to paint their metrics in the best light. Then analysts and experts tend to comment on their reports. It’s not uncommon for them to hone in on a few details while neglecting the broader picture.
So don’t believe what you read until you dig deeper into what they provided to the SEC. You need to know what’s actually going on to be able to make the best investment decisions.
ARLP is a great example of the experts missing the bigger picture and subsequently tanking the stock.
Q4’s Earnings Results Are Changing Market Sentiment
Because everyone thought 2024 was going to be a recession, the earnings reports metrics that have come out so far for 2023’s Q4 have caught most people off guard.
They’re beating expectation by 6% which means the economy is in a much better position than people originally expected. Uhhh didn’t we say we were bullish for 2024?
What’s more important is that they’re now projecting the Earnings Per Share of the S&P 500 as a whole to grow by 10% in quarters 2, 3, 4 and then the first 2 quarter of 2025.
And they’re projecting a 19% growth of the S&P 500 for 2024 and 15% growth for 2025. Recession my ass.
How We Use Earnings
We basically use earnings as our quarterly check in on our holdings to make sure they’re still in alignment with the metrics required for our investing strategy.
We covered this in Episode 18 when we discussed how often you should monitor your portfolio.
We make sure the revenue is still going up, the debt is still going down, the earnings per share, and year-over-year comparisons like operating expenses and profit margins.
You’re basically looking at everything you previously looked at before buying a stock to make sure you still want to be in that investment. Company’s can have bad quarters, so sometimes you’ll have to make judgement calls.
You don’t want to skip this and come to find your company isn’t doing as well months down the road when you could have changed your position.
If you want more of a set-it and forget-it strategy, invest in index funds. Just be aware of the implications of that strategy of investing.
How Long Does It Take To Asses Your Portfolio
When you’re first starting out it’s probably going to take you about 30 minutes per stock that you own.
As you get more familiar with what you’re looking for and what each metric means (and how to read in between the lines) you can probably cut that time down to 10 minutes a piece.
Just look at it as essential maintenance just like anything else you need to care for. This is your income and retirement vehicle.
How Earnings Reports Affect Stock Price
As economics change, the same type of reporting can affect stock prices differently. It’s all about expert and analyst sentiment which filters down to investor reactions.
We used to trade specifically based on projected earnings reports. The whole reason Tim stopped doing that was because of the inconsistent investor reactions to a good or even great earnings report.
ARLP Example
What Most People Focused On In The Earnings
On Jan 30th ARLP reported its earnings for Q4. In their report, they reported that revenue fell by 11%, operating expenses were up 5%, and EPS declined by 46% compared to the 4th quarter of 2022.
“Experts” and analysts focused on these numbers and sold off. Then because of they pushed the price down other investors panicked and followed suit.
This caused another sell off on Feb 5th which pushed ARLP’s stock price down 12-15% from where it was before earnings.
Let’s check it out.
What You Find When You Dig Into The Data
Was revenue really down?
Q4 2023 was 11% less than Q4 2022, yes, BUT revenue for 2023 in total was up 6% compared to revenue for 2022.
Were operating expenses really up?
When you compare 2023’s Q4 to 2022’s, yes, operating expenses were 5% higher. But again, operating expenses for 2023 were actually 6% lower than operating expenses for 2022.
Was EPS really down?
EPS was down when you compare 4th quarter 2023 versus 4th quarter 2022, BUT EPS was actually 10% higher for 2023 in total versus 2022. (FYI any EPS that’s in the double digits is a significant number.)
The so called “experts” missed every one of these important details.
This is why we don’t really listen to what “experts” say and we do the research ourselves. It’s also the same concept of zooming out when you’re looking at the stock market as a whole.
If You Followed What We’ve Been Saying
We recommended this stock previously and didn’t want our IIN-siders to panic so we sent out a special heads up to our email subscribers telling them that the metrics for ARLP are still solid. They’d be wise to hold and told them we’re buying the dip.
If you got into ARLP when we first started talking about it, you’d have had a buy-in price of around $18 per share. So you could afford to take a hit during this earnings panic without losing any initial principle.
Tim highly suspects that ARLP will go back up to the $20-$25 range by the end of 2024. You’ll increase your dividend earnings by picking up more shares at the current discounted price. Just saying.
Don’t Panic Sell When Prices Drop
Whether prices drop because of news or earnings reports, if the company still has good metrics, price reductions are buying opportunities. Many panic moves cause good companies to lose 25% of their value temporarily.
We never recommend using stop losses. (24 min mark) You end up losing more money and the goal for income investing is to buy and hold good companies they pay consistent dividends.
If you’re looking to get into Blue Chip stocks, these drops are perfect buying opportunities. We buy MMM every time it drops below $100 per share.
Verizon & AT&T both dropped a lot during that lead issue. Other panicked and we took it as an opportunity to get into other wise overpriced investments. Chipotle drops when there’s an E.coli outbreaks.
Other Earnings Reports For Our Stocks
Hercules Capital – HTGC
If you want to see what a really good earnings report looks like, take a gander at Hercules Capital for Q4 2023.
We’ve been beating the table on this stock. The earnings were so good, that it went up so much in 2 days that we had to turn the DRIP off. It’s almost at it’s 52-week high which just so happens to be it’s All Time High.
Their investment income was up 38.5% year-over-year. EPS was 12% higher than the estimate. The net investment income was up ~30% from 2022. The operating expenses declined 5% year-over-year.
HTGC might have moved the needle a bit too far, so we may have to asses whether it’s overvalued or not. This decision is usually based on total portfolio allocations for each stock.
Icahn – IEP
We previously discussed having to sell half of our IEP holdings because we were over allocated in our portfolio which put us at risk when this stock ran into some trouble last year.
A short seller pointed out some issues which had merit and the stock price fell. So IEP had had to cut their dividend in half which caused the stock to fall again. It lost 70% of it’s value total in that whole mess.
Despite taking a $4,000 loss, we actually made out by using the proceeds of the sale to invest in other investments like KRP, NEP and some of the YieldMax™ ETFs. Don’t be scared to cut losses if you’re following the system.
We held the other half of our shares and actually started picking up shares in Carmela’s mom’s retirement account because the metrics are still good. If you had followed our moves, you’d be in a good position for what’s happening now.
Carl Icahn has since overhauled their company to fix many of the not so great things that were going on. This is why we love this man. They nixed their short selling, upped their energy holdings and bought 10% of JetBlue.
IEP went up 12% last week and we expect more climbing to come, but maybe not depending on what gets reported in their earnings coming this week. Q4 might be too soon to reflect their changes.
Pretty Much All The Utilities
We talked about a bunch of utilities in Episode 33. BKH had a really good earnings report. NEE and NEP killed their earnings.
We’re starting to see more and more emails from investing subscriptions Tim gets that are pushing NEE and NEP. Looks like Tim was ahead of the curve on these 2.
OGN
This is a pharmaceutical company that we mentioned before as being vastly undervalued. We picked it up at around $11 per share. After earnings it went up to almost $20 per share. It’s no longer undervalued.
BTI
This was another majorly awesome earning report beating.
COIN
Coinbase smashed its earnings. We don’t necessarily care about in itself but it does tie into the performance of its YieldMax™ ETF… which we’re invested in.
MO
For those of you who aren’t averse to sin stocks like this tobacco one, MO smashed their earnings. You’d think cigarette companies would be hurting, but this company has been expanding into other nicotine products including vaping.
Pepsi is another company that’s done something like this which makes it a better investment compared to Coke.
ABR
This company had a some conflicting earnings report. Their revenue was good but their EPS went down. This would indicate a price decrease which we’re seeing.
But Tim actually thinks there’s some manipulation going on based on how the stock price has been moving. It’s likely that short sellers are targeting this stock.
We still think this is a good company. The revenue is still good despite their EPS going down. And obviously their interest payment have gone up because of taking on debt at the higher interest rates.
Speaking of higher interest rates. If you haven’t signed up for Worthy Bonds yet, you might want to think about it. They’ve upped their interest rate to 7%. Get a free bond using our affiliate link.
Potential Bad Upcoming Earnings
UAN looks like it might not fair well. They have a huge dividend, so we’ll have to see how that one reports.
Camping World CWH reports soon. We have no idea what this one’s going to look like or how investors will react because it shifted from a great dividend payer over to growth mode after slashing its dividend 70%.
It could shoot up though because of all the RV dealership acquisitions. So we’re curious to see what this one does.
MWP has been a great stock for a long time but recent issues with debt and interest rates have caused some major pullbacks after significant dividend cuts. And their biggest debtor hasn’t been paying.
Their earnings report will provide a much-needed health check for this company. Tim thinks they’re going to cut their dividend again.
A Few Growth Fliers
Tim’s picking up some speculative yet potentially big winners in his retirement portfolio for S&Gs. He’s not putting a ton of money into any one of them and these are going to be long term holds before anything crazy happens.
- SOFI
- PLTR
- EXAI
We haven’t talked about these before because they’re so speculative. But Tim’s now getting tons of emails pushing EXAI (and NEE/NEP but we talked about that in the utilities episode).
One of the publications wanted $2,000 just to reveal the ticker! Talk about scammy.
EXAI is already partnered with 6 big pharmaceutical companies because of their revolutionary AI program that takes an individuals health info and symptoms and generates a specific treatment plan.
Stock Up On These
Utilities
Many utilities companies are still underpriced right now. The government won’t let them fail, so these are a great hedge for every portfolio. Listen to Episode 33 for Tim’s top utilities picks. We also found 2 new utilities using Tim’s new stock screening which we share in episode 37.
They don’t yield the 10-12% we look for in other investments. But if they yield 5% and raise their dividends 10% every year, in 5 years you’ll be making double digits anyway.
REITs And BDCs
Keep stocking up on these because they’ll start to turn around once the FED lowers the interest rates. It looks like it might not be until mid year because the inflation data that came out this week wasn’t so good.
These have lower revenues because of higher interest rates, but that’s going to change soon.
YieldMax™ ETF Update
These don’t have earnings reports, but since they’re each based on an underlying company, those companies would be the ones to look at. If you don’t know what YieldMax™ ETFs are, go back and check out Episode.
TSLY has been performing like poo poo caca even compared to Tesla. It has a big dividend, but we’re not sure it’s worth that volatility.
The ones that have been really good and paying between 10-20% yields are
- Amazon AMZY
- Coinbase CONY
- NVIDIA NVDY
- Microsoft MSFO
We are still invested in others like AIYY and XOMO
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