Adventures in stock forecasting

I've been meaning to write about this article for a while.  It's talking about things financial analysts say that don't make any sense.

A few of them are great:

4. "Earnings met expectations, but analysts were looking for a beat."
If you're expecting earnings to beat expectations, you don't know what the word "expectations" means.

And most of them are pretty good.  But I do take a bit of an issue with this one:

2. "Earnings were positive before one-time charges."
This is Wall Street's equivalent of, "Other than that Mrs. Lincoln, how was the play?"

And that's because it's rarely true that those one-time charges are enough to sink a company.  And unless they are, all you really care about is whether the company can continue to make money.  If continuous revenues and expenses lead to a profit, you don't really care if one lawsuit knocked that into a quarterly loss.  Unless that lawsuit is immensely bigger than revenues, or unless you can reasonably expect it to be repeated by a bunch more follow-on suits.

For instance, investors didn't really care about the SECs recent $13B fine against JP Morgan-Chase.  It's roughly seven months profits, but has zero long-term effect on health of the company.  Now, if that had been a $130B suit, they would care (and the flip response there would be dead-on), but at that level?  Big deal.

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