🧠 An Earnings Season Hack

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Spring is upon us. And spring cleaning is a right of passage we still practice today. It started hundreds of years ago when families survived winter by using the fireplace. Come May, they needed to clean the accumulated soot.

Of course, many of us don’t have that concern today. But the ritual continues. And our spring cleaning often turns up huge surprises — things we thought we’d lost or forgotten about suddenly re-appear.

We promise to do better; we’ll stay on top of our clutter. But it’s hard.

The same thing happens with our portfolios. If you invest in individual stocks (like we do), you know that keeping up with the companies you own can be time consuming.

How can we make this process easier?

One trick is to focus you attention on the most important metric in a company’s financial statements. You can’t do this without first getting familiar with an organization. But, once you’ve done that work, it can make a big difference.

For example, here’s what we’ll be watching like a hawk with three of our favorite holdings:

  1. Atlassian: Here, we’ll watch the income statement. The collaboration space is getting crowded, so we’ll look for gross profit margins to remain stable so we know the company isn’t forced to lower prices due to competition.
  2. Amazon: Over the past year, Amazon has gone on a spending spree. That’s why we’ll look at its balance sheet first. We want to make sure the company has plenty of cash to fund itself while it continues to right-sizing the business.
  3. Mercadolibre: We’ll keep a keen eye on the cash flow statement. Particularly, we want to see what happens to provisions for doubtful accounts. We want to know what’s happening with those MercadoCredito accounts.

Once the key metrics are identified, earnings season becomes much more manageable. You can keep tabs on your holdings, without sacrificing too much free time to research.

We know there’s a steep learning curve to reading financial statements. It seems like there’s so much going on that it’s hard to find & focus on the key numbers.

If you feel overwhelmed, we believe we can help.

Enrollment in currently open for the 4th cohort of our flagship course, Financial Statements Explained Simply. We’ve already helped 600+ investors to master financial statements, so we know we can help you, too.

If that interests you, use the coupon code EARLYBIRD275 at checkout. Just be aware that this code expires on Sunday, May 7th, at 11:59 PM EST.)

Want a sneak peak of the course? Join us on Friday, May 5th for a free “Introduction To Accounting” webinar.

Can’t make it live? We’ll send everyone who RSVPs a replay of the event.

Questions? Just reply to this email. We read every response.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

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