How to avoid losses when your stocks announce bad earnings?

[David411]

what's the best way to save yourself from losses from bad earnings reports, it seems like im holding a few iffy companies that im not sure what kind of earnings theyre going to come out with. Should you sell the stock as soon as the reports come out if theyre bad? or what?

[SpongeBob]

short sell the stock before announcement.

[wqcustom]

in my opinion, it can be risky selling or buying right away once earnings are announced. it usually takes some time to go over everything stated. the initial response by the market to an earnings report can often be wrong and the stock will sometimes move in the opposite direction once all the news is out and everything is analyzed.

my question to you is why are you investing in 'iffy companies'? maybe they're speculative plays? also, you haven't said if you're a trader or an investor in these co's. That plays a role too.

my overall recommendation is to sell prior to earnings. if you're in some iffy co's and have no idea what to expect from their earnings, then i would get out now and find something else better. that's just more like gambling rather than investing or trading. just my opinion, hope you make some cash whatever you decide!

[Mad Girl Investor]

ITS TOO late once they come out, the price drops instantly. Sell prior, ALWAYS!

[financenanc]

If you are investing in companies soley on earnings reports, hence, purely as a speculative play (and you know NOTHING about the company).... then get out early if you discover the earnings news genuinely is negative. As someone said above, though, sometimes the report is conflicting and it takes a while for the facts, and market reaction, to pan out.

Try to have a plan of attack in your mind, beforehand.

What I do if I want to make a quick earnings trade rather then a longer term investment (I call it my "Bird in the Hand" mindset), is research around looking for companies I think will head upwards, longer term, anyway so that even if the earnings report is negative and the stock price doesn't spike...I can switch them into my longer-term investment horizon and hopefully profit in an 8-18 month time frame.

Yeah, this goes against Cramer's general principal in that he says form a strategy and stick w/it....but I prefer doing it to taking a loss!

[tekbubble]

buy right b4 earnings. put a tight sell stop on it. let it ride. sell if and after it goes up.

[David411]

Theyre not exactly iffy companies, for example i have ERTS, which is a great company but I don't think they may of had such a good quarter with the whole console transition

[chinaman711]

I would not hold a tech stock into earnings better to play it safe and buy it back latter if you really like it. Just like ocpi and trbm good examples.

[MoMoney4Me]

A fairly safe method that I've used in the past is to sell half my position about a week before the release, wait until the report and look for a pullback a few days afterward to re-establish my full position again.
If the report is negative, you're already out with half and have limited your exposure in case of a downturn after the report.
One thing that is about as sure an night and day, great reports don't always lead to an instant rise in share price. The saying" buy the rumor, sell the news " affects the stock price a lot. I've seen oodles of stocks pull back 10 - 15 % after a stellar quarterly report, and then begin an ascent again a week or two later.
What you have to watch for is accelerating earnings, ultimately that is the singlemost important and driving factor in a stocks price movement. It may not be immediate, but positive earnings projections ultimately will drive the price up.