Let’s say the analysts were expecting a company (even of the standing of Colgate or HUL) to declare an EPS of Rs. 20.50 but it ends up earning Rs. 19.0, how does the market react?

It panics. To be more precise the media shrill goes up, and the analysts come and give tons of reaction to what happened to the Rs. 1.50 of how the company “missed earnings”. It is not (never) about the analysts getting the figure wrong, it is about the company getting it wrong.

So IMMATERIAL of the fact that it just made tons of money for the shareholder, the share gets hammered. I think it is an awesome time to buy the share. Sell it after 5 weeks. Wait for another “missed earnings” result to repeat the transaction.

Jokes apart from when did the market become a Q on Q market? I am not holding Cummins and Siemens to worry about a quarter when they under perform or show a loss, am I?

I think it comes from the ‘loss aversion’. When a  company misses or earns less than what the analyst thought the company would earn, people sell IMMATERIAL of the fact that it just NOW made a bunch of money for the shareholder. I guess it is the brain signaling a ‘sell’ because it was not ‘predictable’. You should ask yourself will people buy less toothpaste because it ‘missed’ its earnings by Rs. 1.50?

will its margins go down?

is there a problem in its Corporate Governance?

is it losing market share?

after all I bought the share for these attributes, NOT FOR THE quarterly earnings being on the dot!

I would urge all you “value” investors to do the following:

Ignore the quarterly result, unless of course you are playing the momentum

If you have 5000 shares of say EiD Parry TRADE IN 4000 shares. Use momentum to buy if the results are bad and sell if the results are good. The quarterly result madness gives us a chance both ways.

If it is a company whose share value fluctuates too much, be aware of what the company is doing. Even though I do not like the ‘quarterly’ predictions, I like companies to do what they say.

Ignore the shrill voice of the analyst if he is screaming about the Rs. 1.50 missed and is IGNORING the Rs. 19 it earned in that quarter. Realize that companies are here for making money for you in the long run, not on a Q on Q basis. If you cannot do that, just do a RISING and perpetual sip in an index fund.