☕ Why stocks with great earnings don't do what you expect

Good morning! 👋 

It’s Hayley here today while Keith deals with a few personal matters. 

The markets are green again in premarket trading as I type, after a mixed couple of weeks. 

It’s almost like they can’t make up their mind. 🤦‍♀️

One day it’s fear, the next it’s FOMO. 

That kind of back-and-forth isn’t unusual, it’s what happens when traders chase headlines instead of fundamentals. And it’s no surprise, really, given we’re in the thick of earnings season. 

Speaking of which… have you ever wondered why companies can post great earnings and yet the stock still falls? 

Take Palantir, for instance. Team Karp beat on both revenue and profit, yet the stock still slid - prompting plenty of “what gives?” questions. 

This kind of move can be frustrating if you’re watching the ticker minute by minute… but for disciplined investors with a plan, it’s a gift. 

Keith unpacked this brilliantly yesterday with his good friend Scott “The Cow Guy” Shellady. (Watch) 

The drop wasn’t because the business stumbled… it’s because Wall Street’s algorithms did what they do best... run the price up ahead of earnings, wait for retail traders to buy in, then pull the rug to trigger stop-losses. 

The institutions win twice - once on the way up, and again on the way down. 

Always do what Wall Street does, not what it says. 

Keith shared some practical tactics in his conversation with “The Cow Guy”, but the bigger takeaway is simple: 

Stop fixating on “what could go wrong” and start considering “what could go right.” 

That mindset shift is everything.

Too many investors miss rallies (like after tariff fears) because they’re waiting for everything to go wrong - meanwhile, disciplined investors are capitalising. 

Just look at the S&P 500, it’s returned ~34.93% off April lows. Not to mention names like Palantir and Nvidia which have returned ~158.02% and ~104.84% respectively.  

Most investors play not to lose rather than playing to win.  

And as Keith put it: people buy stocks the exact opposite way they shop: they rush in when prices are high and panic when they’re on sale. 

Which brings us right back to today. 

There’s fear swirling around “priced-to-perfection” tech names, yet the AI trade continues to show its staying power.  

Case in point: 

• AMD’s Financial Analyst Day showed us that AI momentum is alive and well, with deeper integration and growth planned across every segment. 
• Foxconn, one of Nvidia’s key suppliers, just posted a 17% profit jump - crediting AI demand and expecting this to continue.  
• And the big clue? CapEx from tech giants like Microsoft, Google, Meta and Amazon is at record highs. 

Follow the money. 

And it’s not just tech showing strength. 

According to FactSet, roughly 91% of S&P 500 companies have reported so far, and of that bunch, about 82% have posted positive earnings surprises, while 77% have topped revenue estimates. 

Not too shabby! 

The blended growth rate now sits at 13.1%, which, if it holds, would mark the fourth straight quarter of double-digit earnings growth. That’s up sharply from the 7.9% analysts were expecting at the end of September, thanks to stronger-than-expected results across ten of eleven sectors. 

Now for guidance... forty-two companies have gone cautious, thirty-one optimistic, exactly what smart management teams do when they’re managing expectations, not confidence. 

The buildout has only just begun, and these are the shifts that quietly build the next leg higher.  Add in renewed optimism around a potential U.S. shutdown resolution, and we could have an interesting finish to the year.  

With that, let’s MAKE it a great day. 

You got this — I promise! 

Hayley E 😀