🧠 The Importance of Earnings

Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today’s Issue Read Time: <3 minutes

Lesson: What Really Drives Results
Timeless Content: Morgan Housel on luck
Thread: Ben Graham book summary
Resource: Berkshire Hathaway shareholder meeting highlights
And more!

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Friends,

Tell us if you’ve heard this pithy line before:

If you missed the best 30 days of stock market returns over the past three decades, your returns would have been obliterated.

There’s data to back that up. Here’s the evidence Hartford Funds offered its clients.

Data and Image source: Hartford Funds

The spirit of this message is on point: don’t sell when there’s volatility.

But beginner investors walk away missing two very important caveats:

Bad Days: The market’s worst days are often within the same week as its best days. From New Year’s 2009 to mid-March 2009, the S&P 500 fell 27%. And yet, there were five days when the market jumped at least 2%. Volatility is volatility — in both directions.
Individual Stocks: Of course, all stocks can be effected by large moves in the S&P 500. But over decades, the best investments do not move in tandem with the market.

Here’s the missing piece for long-term investors: nothing drives stock prices more than results. Investors also get the most information about results during earnings season.

Thus, if you’re looking for a time when your investments will gradually become decoupled from the market—in a good way—look no further than earnings season.

We don’t think anyone should freak out or rejoice over one earnings report, but we do think this is where there is real evidence that can battle-test your original investing thesis.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

P.S. Need help analyzing a company’s quarterly results? Check out this YouTube video we made on how we review quarterly earnings.

One Simple Graphic:

One Piece of Timeless Content:

Morgan Housel helps investors develop a beneficial mindset about investing in an easy-to-understand and memorable way. In one of his recent blog posts, Lucky versus Repeatable, he defines luck in a way you’ve never thought about before and ties it to investing.

One Thread:

Brian Stoffel

@Brian_Stoffel_

Warren Buffett’s favorite investing book:
Securities Analysis by Ben Graham
It’s FILLED with timeless wisdom that still applies today.
Here are 12 powerful lessons every investor should memorize:⤵️

8:57 AM • Apr 27, 2024

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One Resource:

Did you miss the Berkshire Hathaway shareholder meeting? It was live-streamed on CNBC, along with an article that included live updates of the most interesting moments of the five-plus-hour Q&A session.

One Quote: