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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael

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Speaker 1: Thompson and hello Sean Aylmer. Hello Michael, Sean. Good question today.

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Speaker 1: It is from Lily via Facebook, and if you have

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Speaker 1: your own question, you can jump onto Facebook or Instagram

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Speaker 1: or LinkedIn or head to Fearangreed dot com dot a

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Speaker 1: you and send your question into us and we will

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Speaker 1: pop it on the list. Lily says, I know it's

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Speaker 1: earning season. Every day we're hearing about companies meeting expectations,

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Speaker 1: et cetera, et cetera. The email actually says et cetera,

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Speaker 1: et cetera. But there is so much information when a

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Speaker 1: company gives its results. What should we be looking at

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Speaker 1: or looking for? Where do you even start? And there

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Speaker 1: are three question marks on the where do you even start?

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Speaker 1: So it feels a little bit like Lily is desperate

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Speaker 1: for some help on this one.

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Speaker 2: Sean, what an excellent question understanding what's in a profit report?

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Speaker 2: Or it isn't for the fainthearted. Lily. Take the Commonwealth

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Speaker 2: Bank presentation with its results yesterday. It was a mere

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Speaker 2: one hundred and twenty eight PowerPoint pages then there was

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Speaker 2: the annual report, There was the climate report. There was

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Speaker 2: the bar three pillars three disclosure, absolutely no idea on

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Speaker 2: that one, as well as the actual announcement to the exchange,

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Speaker 2: plus more just reams and reams of paperwork. It is

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Speaker 2: very hard for highly paid investment analysts to understand fully

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Speaker 2: what companies are reporting in their results packages, and they

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Speaker 2: make a living out of it. I know for a

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Speaker 2: fact that companies can work very, very hard to hide

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Speaker 2: certain information in profit packs. I also know that analysts

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Speaker 2: poor over the information for days and days to understand

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Speaker 2: what's going on. And some companies are far bigger and

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Speaker 2: more complicated than others. Banking and insurance is particularly complex.

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Speaker 2: So what hope do we mean? Mortals? And I you, Michael,

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Speaker 2: your lesson to me immortal?

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Speaker 1: What hope do we have a sub mortal?

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Speaker 2: So sure the short answer, but I'll give you more.

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Speaker 2: The shorts use the financial advisor, right, They normally get

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Speaker 2: their recommendations on what's good or otherwise from these professional analysts.

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Speaker 2: That would be my recommendation.

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Speaker 1: Beyond that, can I ask you a question that would

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Speaker 1: kind of perhaps lead you into where you would go?

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Speaker 1: You have been a reporter, a journalist covering. I don't

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Speaker 1: know how. I wouldn't even want to guess how many

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Speaker 1: earning seasons you have covered. I'm guessing it would decades

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Speaker 1: and decades and decades a set, and so you kind

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Speaker 1: of you wouldn't have time necessarily to go through everything

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Speaker 1: in a lot of detail. Others, are there some kind

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Speaker 1: of headline pieces that you look for?

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Speaker 2: Yeah, net profit is a company making money? What's been

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Speaker 2: the trend over time? Did it end going up or down? Profit? Mygents, increasing, reducing?

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Speaker 2: That kind of introduces the nation of revenue, top line growth,

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Speaker 2: what's happening to costs? That sort of stuff. Return on

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Speaker 2: equity really simple metric for shareholders. Then you've got to

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Speaker 2: look at stuff like the sectors that they're operating in.

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Speaker 2: Like comparing a bank to a retailer to a tech

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Speaker 2: stock is vastly different. The life stage of a company.

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Speaker 2: Startup might not make money, but be in a better

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Speaker 2: position than a mature company with a steady stream of profits.

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Speaker 2: The macroeconomic climate, A bunch of companies kind of got

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Speaker 2: stuffed up in the last couple of years as interest

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Speaker 2: rates rose. Suddenly their debts and what they had to

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Speaker 2: repay every quarter increased. That mucked them up a bit,

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Speaker 2: how results compared to expectations of the professional analysts. They're

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Speaker 2: all kind of the things that I suppose as a journalist,

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Speaker 2: I would look at or maybe just fall back on

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Speaker 2: Warren Buffett's rule for investing. But it's fairly simple, the

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Speaker 2: two rules, well, his two main rules, rule number one,

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Speaker 2: never lose money. Rule number two, never forget rule number one.

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Speaker 2: That's another option that is very good, maybe actually the

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Speaker 2: very best. I don't think well, certainly, I don't have

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Speaker 2: the capability to look at an annual that earning season,

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Speaker 2: to look and trade on it. It's too hard for

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Speaker 2: someone like me. I don't understand it enough. And I

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Speaker 2: think many investment analysts who are paid a lot of

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Speaker 2: money to do this kind of are a bit the same.

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Speaker 2: Maybe the best idea is actually to keep an eye

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Speaker 2: on the share price for a couple of weeks after

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Speaker 2: a result, not just twenty four hours, but actually over time,

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Speaker 2: because over time these experts do go through the results,

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Speaker 2: work out what's good, what's bad, and then they make

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Speaker 2: those Bicell recommendation. That kind of trading over a couple

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Speaker 2: of weeks probably gives a good indication or as good

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Speaker 2: an indication as anything else of whether the earning result

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Speaker 2: is good or bad. So read the media release, so LITLYK,

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Speaker 2: that's probably if nothing else. Can read the media release,

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Speaker 2: you get an idea, but that's always got the spin

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Speaker 2: of the company on it. But I think watch the

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Speaker 2: share price moving.

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Speaker 1: And I like that point that you made about how

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Speaker 1: the result compares to expectations of the professional analysts, because

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Speaker 1: often there is kind of coverage in the lead up

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Speaker 1: to results being reported about what people are watching and

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Speaker 1: the expectations, and then you kind of pinpoints the things

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Speaker 1: that other people are going to be watching and that

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Speaker 1: might help you zero in on what you should be

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Speaker 1: looking at as well.

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Speaker 2: Yeah, tadly, and companies guide the professional analysts to towards

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Speaker 2: a range of profit. So what you find and you

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Speaker 2: can have a profit triple and nothing happens to the

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Speaker 2: share price, it can cut in half. So JBHIHI earlier

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Speaker 2: in the week profit was down and its share price jumped,

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Speaker 2: you know, high sort of seven or eight percent. It's

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Speaker 2: because it was better than expectations. So it's less about

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Speaker 2: kind of year on year. It is all about those

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Speaker 2: expectations and what professional investors expect to see and that

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Speaker 2: actually the short term, the very near term share price

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Speaker 2: moves really reflects the results versus expectations.

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Speaker 1: There's some fantastic lessons from your many decades of reporting,

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Speaker 1: many decades. I'm certainly rounding this up a little bit.

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Speaker 1: Remember that time that I described you as having worked

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Speaker 1: in the media for the better part of half a century,

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Speaker 1: and because it was like twenty six years or something,

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Speaker 1: technically I was right, but you were most unhappy with me.

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Speaker 2: For that one. I had to go off and have

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Speaker 2: a nap after that.

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Speaker 1: I was yes. At two pm, I felt about right. Okay,

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Speaker 1: thank you, Lily. What a terrific question. I really enjoyed

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Speaker 1: kind of getting to that one. So thank you Lily

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Speaker 1: for sending your question in and thank you Sean for

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Speaker 1: answering it.

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Speaker 2: Thank you, Michael, Thank you Lily.

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Speaker 1: Now remember, if you've got something that you would like

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Speaker 1: to know, then send your questions through on LinkedIn, Instagram,

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Speaker 1: Facebook or at fearanngreed dot com dot au. We would

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Speaker 1: love to receive it and love to answer it. I'm

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Speaker 1: Michael Thompson, and this ask Fear and great