🧠 The Importance of Earnings


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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.

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:

  1. 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.
  2. 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:


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:


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More From Us:

📗 If you've read Brian Feroldi's book, he'd love a review.

👨‍🎓 Interested in learning to read financial statements like Warren Buffett? Check out our self-paced course, The Buffett Method.

🎬 Want a review of popular company earnings? Check out our YouTube channel! Cloudflare, Apple, & MercadoLibre earnings videos are now available!


Long-Term Mindset

I teach investors how to analyze businesses. Each Wednesday, I share six pieces of timeless content that can be read in less than 2 minutes. Read by 100,000+ investors from a16z, Amazon, Google, Microsoft, and more.

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