Playing Earnings, T/A Zscaler

This started on the Zscaler thread, but thought it deserved a new thread. I am not playing earnings anymore!

T/a this, T/A that. T/A was set up for Pivotal. There was information from VMWare that things were going smashingly good. So, a stock I had sold off and wanted nothing to do with, I bought back. What the heck. A little fun play and it may have a big bounce. T/A was of no use and the VMWare information turned out to be useless.

Nvidia, a company I love talking about, but sold off, and only got back into it a few days before earnings because it was nearly impossible to believe that NVDA’s actual results mirrored the total calamity that the market was indicating, and hey, “T/A” was lining up as well for it. Not. It was not actually a mental mistake moving to Nvidia (as it clearly looked over killed) but nevertheless, these rules of thumb (one or two discussed below) would have prevented the issue had I just gotten back to my usual philosophy (as discussed below as well).

Look at the history of ABMD, TWLO, NTNX, TTD, so many. All recent IPOs. Would you have been better off every earnings looking to T/A, looking to backwards looking sales multiples, reading negative press and getting scared, playing earnings (should I be in, should I be out), or simply getting on with your life?

The math says simply and overwhelmingly getting on with your life and adding systematically.

Either you want to be in the stock, or you don’t. If you want to play earnings, more power to you, have at it.

With this entire market crash, the only place that I have lost money has been in precisely two places (1) playing Pivotal earnings (I had otherwise dumped Pivotal and never again intended to invest in it), (2) {was not my intent to play earnings - but that was the catalyst for me getting back in} Nvidia. Two stocks that had sold off. One bought back specifically for an earnings bounce, the other based upon what appeared to be absurd valuation with pessimism so low it could not equate to reality (and in 9-12 months it will not - but that is then an this is now).

Where do I lose money? Nearly 100% in “cheap” circumstances. Where do I not lose money? Investing in what I really want to own without reference to T/A or its “overvalued” - as long as IT IS NOT CHEAP!

Yes, I do look carefully if it is a bubble, or just goes out of my comfort range but otherwise, just holding and adding and not widening my eyes beyond a nice 15 degree peripheral vision (180 degrees is too tempting and too counterproductive).

So yes, I am a bit peeved at myself for breaking out of my “do-nothing” mold and getting caught up in the fickleness of it all. There is a time to do something, even in a “do-nothing” philosophy (as I did earlier this year), but there is no place in (1) playing earnings, (2) buying anything that is textbook cheap and thinking the market just has it wrong.

At this point in time, I’d rather hold Zs, watch it go down 30%, continue buying systematically, and not feel an ounce of regret than playing another earning bounce or looking at another T/A analysis or looking at anything else that is TEXTBOOK cheap. May sound counterintuitive the latter, but do your own history lessons. The reason I will sell something will have nothing to do with earnings scheduling nor T/A ever again in the rest of my life, and textbook cheap will never be a reason to buy anything again.

Some rules of thumb are meant to be interpreted and have exceptions, these ones are fixed in stone and results in the death penalty if violated (from my perspective).

Now, with blood pressure down, off to kick my son’s butt in an epic mini-golf rematch - side bets allowed.

Tinker

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  1. I’ll bet 1 share of ZS (to be donated to charity) that your son BEAT YOUR BUTT.

  2. Great article Tinker. I think we (me included for sure) over complicate this. One of David Gardner’s rules is to buy greatness and add to greatness over time… or something like that.

He mostly avoids losers for exactly the reasons you stated.

I’ve also “traded” way too much around earnings this season and I’ve learned my lesson. One benefit was the “trading” was around companies I’m a long term investor in. The great results from TWLO and AYX saved me, but did a couple more afterwards that fumbled away what was a significant gain from TWLO and AYX.

Didn’t lose money (got lucky) but wasted a buncha time.

Lesson learned - buy and hold great companies with occasional tweaking based off business results. It’s what we all know to do, but tend to overthink…or think we are smarter than we really are and screw up.

  • Austin

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“Look at the history of ABMD, TWLO, NTNX, TTD, so many. All recent IPOs.”

Tinker,

I know lawyers have the ability and reputation to twist facts to their own and their clients’ advantage. However, as someone with a scientific background and as an investor, I am a stickler for facts (as we know them).

ABMD is not a recent IPO unless you define 31 years as recent. According to their website, and I quote, “Abiomed begins trading under NASDAQ;ABMD in 1987,” http://www.abiomed.com/about.

Gross inaccuracies usually jump out at me - alas, except my own! :frowning:

im

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I think the real issue is what value to put on technical analysis.

Doesn’t matter if it’s an iPo or not.

And for scientific purposes should not cherry pick current winners either. You should get a broad spectrum of stocks you were in over the past few years.

What I have found, and it took me about 15 years to figure this one out, is technical analysis is worthless. The only way I’d find it beneficial is if you put limits at support, which will probably do no better than putting limits at random numbers below current prices.

I have done so much better when I disregard charts. I don’t care what the chart looks like.

For playing earnings it is totally random what the stock does after earnings unless it’s a blowout which you cannot predict. Otherwise it’s random. And if it is a good report what do you do afterwards? Sell? May explain the randomness because everyone is playing earnings these days.

The less I care about making money or charts the better I have done. The more I have cared about finding the best businesses the better I have done. Psychology is so important to good returns in the market.

I started a Roth IRA in 2013 and have beaten the S&P every single year. I went from not caring what the stocks did as long as the companies were good to being infatuated with beating the indexes. It is the only portion of my stock assets I fretted about during this decline. After I noticed that I re-evaluated my thought process and why I was in the stocks I was in (didn’t make any changes).

I spent so much time researching psychology when it came to trading that I thought if I mastered my own psychology I could make money trading off charts. Didn’t realize it was so simple as to disregard the charts to make money.

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Hi Imyoung,

I know lawyers have the ability and reputation to twist facts to their own and their clients’ advantage. However, as someone with a scientific background and as an investor, I am a stickler for facts (as we know them).

I know you are just joking but I think it is important that people are allowed to make mistakes. Investing is never going to be about getting it right every time but about getting better about investing. If every time someone makes a mistake they are then ridiculed that will be one less person that we all will hear from. I think it is much better to correct the mistake and move on.

I would rather invest with someone that is mostly right than precisely wrong.

Andy
Who is looking out for his own interest in case he is wrong on NVDA :slight_smile:

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People I’ve read who short-term trade successfully for a living using TA (i.e. the late trenchrat) say TA goes out the window when it comes to earnings announcements. They don’t hold stocks through earnings announcements because it’s a crapshoot.

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Imyoung,

Have you looked for yourself when ABMD had their Impella product approved for market? No, probably not because you did not add anything but try to attack someone. The productive thing is, “Tinker, that may not quite be accurate” but I see where you are coming from and can add this to better forward the conversation. Seems a reasonable constructive process. Most critics ignore it.

Impella became a viable commercial entity for ABMD at about the same time SHOP and that generation of company went public. And if you look at the history of IPOs such as I linked to, and ABMD, which is now essentially an entirely different company, as if it IPOed when Impella became a commercially viable entity, the shares go way up, they go way down, and they come back around and not a dang thing that t/A and timing the market can teach you.

Had you been so concerned with fickleness, moving in and out, your returns would be greatly diminished.

Now, do you have something to further the conversation, or do you just wish to criticize? I find most people prefer the latter as it is much easier.

And certainly, if the comments I make are so defective there is always the ignore button, one that I use liberally.

Tinker

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@Buynholdisdead,

I know you are just joking but I think it is important that people are allowed to make mistakes.

Yes, I was joking but realized a couple of hours after posting (and reported my post to be removed) that despite my last sentence which should make clear I was joking, my comment could be seen as offensive, especially as the OP does not know me.

Alas, the Fool does not seem to patrol the boards on weekends otherwise the post would have disappeared before people were offended. It should disappear when the Fool gets back to work on Monday.

My mistake.

im

@Tinker,

My apologies. I did not mean to offend you, see above.

“Impella became a viable commercial entity for ABMD at about the same time SHOP and that generation of company went public. And if you look at the history of IPOs such as I linked to, and ABMD, which is now essentially an entirely different company, as if it IPOed when Impella became a commercially viable entity, the shares go way up, they go way down, and they come back around and not a dang thing that t/A and timing the market can teach you.”

To me an IPO is not the same “as if it IPOed" and Impella was a commercially viable entity when CEO Minogue bought it. I’ve held ABMD since 2015 and know the company fairly well. ABMD’s IPO was in 1987 and Impella has been around since 1997, that is, 21 years, and was commercially sold and approved in Europe years before it became a U.S. acquisition.

In 1998 and thereafter, the Impella devices were sold by Impella CardioSystems AG, Neuenhofer Weg 3, 52974 Aachen, DE, a private company co-founded by the inventor. After acquisition in May 2005, ABMD simply renamed the Impella products as well as the company, still at the above address, but now known as Abiomed Europe, GmbH, also a private company, listed as an ABMD subsidiary. About 80% of the Impella manufacture occurs in Germany (at least last time I checked, about 2 years ago) where also most of their research still appears to be done.

Impella products have “officially” been used in humans at least since 2000, with all the studies I could find done in Germany and a few in other European countries, and, they have been commercially available at least since 2002 judging from the review article “Mechanical circulatory support: state of the art and future perspectives” by Dr. Wheeldon, World Heart Corporation Ottawa, Ontario, Canada, World Heart Corporation, Ottawa, Ontario, Canada.

“Impella markets two Class I integrated microaxial pump systems designed for short-term support. The left sided Recover100 is introduced by way of the femoral artery and placed so that blood is aspirated out of the left ventricle into the aorta. The Recover600 is used for temporary support of the failing right ventricle. Anticoagulation is provided by a local purge system and both pumps are approved for use up to seven days. (Courtesy of Impella Cardiotechnik AG, Aachen, Germany.),” http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.896….

The Impella producs received their CE labels (Conformité Européenne or European health and safety product label, similar to FDA approval) well before the acquisition by ABMD (Impella LD 2002-06, Impella 5.0 2003-01, Impella 2.5 2004-09), all several years before FDA 510k approval for the Impella 2.5. in 2008.

The growth of Impella’s use has been slow and steady, to be expected for a product that needs safety studies and approval for each use (heart failure, myocardial infarct, cardiomyopathy, etc.) from each country’s government agency. Hospitals have to approve the use and invest in the set-up to use the Impella and, more importantly, the rest of the developed world other than the US has mandatory healthcare. It means that the use of any medical device also has to be approved by the various health insurance companies and plans for each individual patient and each individual use or else they won’t pay.

I don’t consider ABMD or the Impella products to be recently IPOed or as if IPOed. I don’t usually watch charts but note that the stock price started climbing around October 2014. It just took a long time for Impella products to be approved and to be accepted by those in the field and those who pay for their use. And it took even longer for investors to discover ABMD and its possibilities.

im

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As the ops so frequently say ‘while this thread is off-topic’, I’m not sure why you’re referencing technical analysis Tinkler. There is nothing about Pivotal’s chart that supports using TA to make any decisions.

  1. As the earlier person commented, earnings period is not good for TA as price movement is based on unknown information
  2. Trading within 12 months of an IPO sucks, due to there being a lack of history
  3. There is no 200 day moving average to reference
  4. RSI and MACD indicators have never combined to show a buy, other than early June for a few days.

What indicators were you using that signalled a buy?

As a side note TTD, AYX, MDB, TWLO are all still ok to hold/buy, using technical analysis, after the recent rout - where as NEWR, NTNX, SQ are showing weakness and signals to sell / stay on the sidelines.

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