Holding into Earnings: To Play or Not to Play?

By: ShortMeTina

This lesson  is not speaking to your traditional “buy and hold” investors.   Buy and hold
investors aren’t concerned with the fluctuations of their securities.  They are generally
concerned with the fundamental aspects of the underlying business.  Cash flow, revenue, growth, research and development, etc.  For them, if the company is growing quarter over quarter, year over year, so will the price of the stock.

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Now that is out of the way, “to play or not to play”, speaks to swing traders, and to an extent , day traders.  Inspired by Netflix's (NFLX) earnings beat and subsequent 20% increase in share price in after hours trading; I would argue that holding a security into earnings is pure gamble.   Gamble I tell ya. 
You truly have no inclination as to how the markets will react to earnings.  Beat or miss!  I have been in the markets now for over a decade and have seen many bizarre things.  I have seen companies beat on earnings and effectively crush the Streets' expectations.   Conventional wisdom would say that an earnings beat should lend to an increase in a security's price.  Well, I have seen quite the opposite happen on numerous occasions.  I have seen a company beat by every metric to only see the stock price plummet by 10-20% after hours, and a follow through to the next day's open.  Conversely, I have seen stocks miss on certain expectations; report a loss and see the stock price increase by 15-20%. 
It’s madness I tell you, madness!  And it is because of that, I believe holding into earnings is pure gamble.  

Do you hold into earnings?  

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