EM Talk: Are You Smarter Than 70% Of Americans? | Reporting Season

Bryce: [00:01:28] Equity Mates USA Episode 16 podcast, where we break down the world of investing to try and make that easier for you guys to understand. And as always, I'm excited to be here with my equity buddy Ren. How are you, mate? [00:01:40][12.4]

Alec: [00:01:41] I'm good. Bryce. How are you? [00:01:42][1.3]

Bryce: [00:01:43] Can't complain. Midweek hump day weekend. So let's get stuck into it. This episode, we're going to be talking about a couple of things that we've learnt this week. And then we're going to crack into a discussion on the earnings season, which is perhaps one of the more nervous times of year for investors and fund managers. And because it's that time of year where companies are releasing their end of year results to let us all know how they've been going. [00:02:06][23.8]

Alec: [00:02:07] I guess the first question right off the bat, end of year, isn't it only August? [00:02:10][3.6]

Bryce: [00:02:11] So what? How does that work? Well, I guess we'll get into that when we talk about the earnings season. [00:02:15][4.2]

Alec: [00:02:16] Now, that's a nice tease. That's why youre paid the big bucks. [00:02:18][2.6]

Bryce: [00:02:21] Yeah. So there's a few things what we want to discuss. We want to talk about a few notable results that have come out, what earnings season can mean for you and I. Does it even matter? And you know what's coming up? Because, as I said, we're only halfway through. So that's what we're going to cover. It's a very exciting time of year for investors and those interested in the market. Let's get stuck into it. What we've what this week's Hourihan. [00:02:42][21.0]

Alec: [00:02:43] You should kick us off this way. [00:02:44][1.0]

Bryce: [00:02:44] OK, well, my probably the thing that I remember most, it's not really to do with stocks at all, but I watched the great Netflix documentary called Icarus and it outlines the doping saga that went on in the Russian Olympic community amongst the athletes during the 2016 Olympic Games. Now, I'm not sure if you remember, but they were banned from competing. All Russian teams were banned from competing. Only a matter of I think it was about seven or nine days before the Olympics started. And I'm sure due to huge political pressure, they were allowed to compete in the end. But this documentary essentially outlines this huge scandal that was essentially given permission by Putin. He was the one who started this whole thing that every single team and not necessarily every single athlete, but every single team had athletes that were doping. And, you know, these informants who were sneaking into WADA buildings, drilling holes through walls and slipping out urine samples. And it was this whole organised sort of doping saga that went on. So I'll keep it at that. But very interesting. [00:03:50][66.4]

Alec: [00:03:51] I'm sure there's a I'm sure there's a way we could somehow link that to investing. But, you [00:03:56][4.9]

Bryce: [00:03:56] know, you just don't trust the Russians on [00:03:59][3.4]

Alec: [00:04:00] it. Don't invest in Russia is probably probably a very good one, especially at the moment. [00:04:05][4.5]

Bryce: [00:04:05] I promise next week I'll have something a bit more investee related, but I just find it incredibly interesting. And if you have the time, definitely give it a watch, because it just blew my mind that this came from the absolute top. And, you know, they were they were killing people who were blowing the lid on this. And this documentary accidentally stumbled upon the head of the programme, this guy who was making all of the doping drugs and tests to cheat the system. And he's now in protective custody in the United States because the Russians want him dead, right? Wow. Yeah. He blew the lid on this documentary. [00:04:35][29.5]

Alec: [00:04:36] You Equity Mates he place for investing advice and Netflix. What more could you call it? [00:04:43][7.0]

Bryce: [00:04:43] Real. All right. But if you limit [00:04:45][2.0]

Alec: [00:04:46] my my learning is a little bit more finance related. So financial literacy is, I guess, the theme. You know, that's why we do this podcast. We think it's really important that people understand their finances, understand what's going on in the market. Anyway, I came across this study by a Wharton Business School professor and she put together three questions that is meant to be a test of financial literacy. And would you believe it, only a third of Americans could get it right and only 44 percent of college educated Americans could get it right. So a little bit worrying [00:05:21][35.4]

Bryce: [00:05:22] and live on edge and be right. Yeah, yeah, yes. [00:05:24][1.9]

Alec: [00:05:26] Pulling back the curtain, having told Bryce anything about this yet, I figured would say how financially literate Bryce is and also all our listeners can play along at home. Do I need a pen and paper? No, you don't need anything. Now, remember, only a third of Americans got this right and only forty four percent of college educated Americans got this right. [00:05:44][18.3]

Bryce: [00:05:44] So OK, but I've been crunching numbers all that. [00:05:47][2.6]

Alec: [00:05:47] Yeah, no, no shame you get us wrong. You'd be in the majority if you didn't pass, but. All right. So financial literacy, question one. Suppose you had a hundred dollars in a savings account and the interest rate was two percent per year after five years, how much do you think you would have in the account if you left the money to grow a more than one hundred and two dollars? Exactly. One hundred and two dollars or say less than one hundred. [00:06:09][21.4]

Bryce: [00:06:09] A more than one hundred and two dollars? [00:06:11][1.6]

Alec: [00:06:11] Yeah, that is correct, because it's two percent a year and you have one hundred dollars in the first year you'll have one hundred and two dollars and then from year two to five obviously it will go above one hundred and then you go and you say, oh sorry. [00:06:26][14.7]

Bryce: [00:06:27] On par with my. [00:06:28][0.8]

Alec: [00:06:28] No, no, no, there's two questions to go back. Yeah, yeah. So number two, imagine that the interest rate on your savings account was one percent per year and inflation was two percent per year after one year. How much would you be able to buy with the money in this account? A more than today be exactly the same, say less than today. [00:06:47][18.4]

Bryce: [00:06:47] I'm going to have to lock in a steady less than today. [00:06:51][3.2]

Alec: [00:06:51] No, it's all right to an attorney for any listeners. I'm sure the reason that that's the case is if inflation is rising at two percent a year, but your money is only growing at one percent a year, then the amount that you can buy with your money is [00:07:05][13.9]

Bryce: [00:07:05] less because inflation is the rise in prices of everyday goods. [00:07:09][4.3]

Alec: [00:07:10] Exactly. All right. And that's why and hopefully everyone playing along at home is also on two out of two. Number three, are you in those vaunted few who are financially literate? No. Please tell me whether this statement is true or false. Buying a single company stock usually provides a safer return than a stock mutual fund. For those unsure of the terminology, Stock Mutual Fund is a fund that holds a variety of different stock. [00:07:37][26.8]

Bryce: [00:07:37] OK, from a basic perspective. I am going to say the answer to that question is false. [00:07:43][5.2]

Alec: [00:07:43] So the the mutual fund is safer, correct? Yeah. Nice one. Nice one. There you go. So you you're in that third of Americans that could answer all three questions. And so according to this test, are financially literate. [00:07:58][14.7]

Bryce: [00:07:58] Thank goodness. [00:07:58][0.2]

Alec: [00:07:59] So the reason the reason I wanted to bring that to the table today is, you know, it might be surprising to some listeners that, you know, they got a couple. Right? They got all three. Right. Just how, I guess, how advanced they are compared to you. We are talking about America, but I'm sure if you did it in Australia, you might get similar results as well. So financial literacy is it's not exactly high up on People's Party. But, you know, to my mind, it is the most important thing to secure your future and to live comfortably and retire. Well, so, you know, now that I understand the interest in inflation and from that hopefully, hopefully everyone listening got three out of three or at least something. So they'll get three out of three next time. Now, that [00:08:38][38.5]

Bryce: [00:08:38] was good and I enjoyed [00:08:39][0.6]

Alec: [00:08:39] that. I'm glad you got all three. Right. I could have gone. Yeah. [00:08:43][4.5]

Bryce: [00:08:45] Lost all credibility. I'm going to definitely have to step up my game for next week's What I Learnt after after that one song. [00:08:53][7.6]

Alec: [00:08:53] I like I like that place recommendation. I haven't seen it yet, so I'll have to get on it. [00:08:58][4.2]

Bryce: [00:08:58] Get on it. All right. So reporting season or earnings season or the silly season or [00:09:04][6.1]

Alec: [00:09:04] earnings palooza [00:09:05][0.4]

Bryce: [00:09:06] balloons all the time is upon us. We're all publicly listed. Companies are now obliged to report their earnings and result for the last 12 months. And as I said at the start of the show, Ren, that this is a time that can make some investors very nervous about the investments that they've made, because if you're holding a stock and it comes out with a performance that you were not expecting, it can either have adverse or positive effects on the share price. So Ren don't give a bit of an explanation briefly as to what is earnings season. [00:09:37][31.1]

Alec: [00:09:38] Yeah, definitely. So to start at the very beginning, the financial year runs from the 1st of July to the 31st of June every year. And all earnings season is is, you know, companies. The financial year ends on the 31st of June. They figure out how much money they made for the year, in some cases, how much money they lost for the year. You know, they look at all their important metrics, how many items they sold, how many customers they acquired, all that stuff. And then they have to report that to the market. [00:10:05][27.7]

Bryce: [00:10:06] So do they have to. [00:10:07][1.1]

Alec: [00:10:07] Yeah. If so, if you're a publicly traded company, if you're on the stock market, then you have to that's that's part of the condition for being a publicly traded company. Yeah. And look, there's heaps of reasons for that. You publicly traded you have an obligation to let all investors know all the information. Otherwise you're going to have a situation where savvy investors or people with Connexions will have a lot more information than anyone else. [00:10:30][22.4]

Bryce: [00:10:30] The investors are essentially the owners of the company, so they have as much right as anyone to know. [00:10:34][4.0]

Alec: [00:10:35] Yeah, the company definitely. Yeah, yeah, yeah. So what how it works is because the financial year ends thirty first of June, then the bulk of companies report in August, some do it in late July. But what we have is basically a month of every day except for Saturdays and Sundays. We'll get different companies listed on the stock market telling us how they've gone. The market will react to that. And, you know, it's an important time of the year to see how your investment is going, whether what you think about the company is laying out or whether you were completely wrong. [00:11:08][33.2]

Bryce: [00:11:08] My second question is, is there a cut off for reporting season? Do you know or can companies just report whenever they want between now and the end of the year? [00:11:17][8.4]

Alec: [00:11:17] That's that's a good question. The there will be a cut off. Unfortunately, I don't actually know when the cut off would be, you know. [00:11:25][8.0]

Bryce: [00:11:26] Yeah, it's the end of August I. [00:11:27][1.2]

Alec: [00:11:27] So they've got to be done by the end of the year. Yeah, the next question we should probably address is how much should we care about it? You know, should we be poring over every page of annual reports or [00:11:38][10.4]

Bryce: [00:11:38] is it a big deal? [00:11:39][0.5]

Alec: [00:11:39] Yes, exactly. [00:11:40][0.5]

Bryce: [00:11:40] Yes and no. Obviously, if you're working in an investment fund or you're full time dedicated to investing, then, yeah, you're going to pay a lot of attention to these reports and go through the annual reports and the investor presentations and scrutinise the numbers and formulate your own opinions about what's going on. But for investors like you and me, Ren, I would think that it's important to understand where your companies are. And one of the things I really like about reporting season is that usually the companies will give you a sort of estimation of what's coming, you know, what what are their growth strategies, what they sort of see the earnings as going into the next year. And I like to use that as a judgement of whether or not I'm going to buy more of the stock or hold the position. I mean, so, yeah, I do put some sort of weight on this period of time. I mean, do you think it's important? [00:12:29][48.7]

Alec: [00:12:29] Yeah, I really do. And I think it is for a number of reasons. So the first one that we touched on before is you can say, you know, when you buy a company or when you buy a stock, you should have an idea of why you're buying it. You know, you think it's going to sell a trillion units in China or you think, I don't know, it's got some crazy new drug that it's going to put on the market that will cure cancer. You know, you have a reason and this is a really good chance to take stock and see if they're progressing towards that goal, [00:12:57][27.9]

Bryce: [00:12:58] no pun intended to take stock. OK, I'm sorry. [00:13:02][4.0]

Alec: [00:13:03] Legitimately, no pun intended. Yeah. So you can say how they're going and every company will release an annual report. And that's a good opportunity to read how senior people in the company perceive how they're going. So, you know, they'll talk about the opportunities, the threat, how they've gone, how they're going. That's a really good opportunity to get some perspective that you rarely get throughout the year, at least in that much detail. [00:13:27][23.2]

Bryce: [00:13:27] Speaking of threat. Yeah, just before you go on. Sorry, Ren. Yeah, got me. So, you know, if I have to wait, it seems a bit ridiculous that they release now and then I'll have to wait a whole nother year to get another annual report or get another earnings. Is there anything that happens? [00:13:42][14.7]

Alec: [00:13:43] It does seem a bit ridiculous, doesn't it? What else is a little of that [00:13:47][4.9]

Bryce: [00:13:48] mid year or the year before I get an idea of companies tracking. [00:13:52][3.5]

Alec: [00:13:52] Yeah. So what you're alluding to is companies also have to report on their half year results. So from 1st of July through to is it the 31st of December or something like that? Yeah, that would be there'll be a statutory [00:14:05][12.9]

Bryce: [00:14:06] Cut-Off politically after [00:14:06][0.8]

Alec: [00:14:07] the year. Yeah. But essentially it's there. They release their half year results in February generally, and it's about the first half of the financial year and how they've gone. And so that's another opportunity is not as much detail as the full year report, but it's another good opportunity for investors and the company to take stock and to look at how they're going. But what I was so what I was going to say about the end of year result, it's important to care, but it's also a time when some people care too much. Now, what do I mean by that? What do you mean? And so as we keep saying on this podcast, the biggest advantage you can have in the market is taking a really long term perspective and trying to and not trying to make a quick buck, not trying to day trade, because there are far more sophisticated investors out there doing that. But far more time, far more far more people working for them. And we don't have an advantage. But what you say around earnings time is that these people, they these, you know, day traders and they try and make a lot of money based on the earnings. So they'll try and predict how stock is going to go. And, you know, if a stock profit expectations, then you say it shoot up. But similarly, even if a stock is doing quite well and, you know, even if it's increased its profit, if it hasn't increased its profit as much as the market might want it to have or might have expected it to, you will see it decline. And you might say it decline more than more than is sort of logical, I guess. So there is sometimes opportunities to get a little bit cheaper just because of the amount of short term trading going on around. [00:15:33][86.6]

Bryce: [00:15:34] So it sounds like what you're saying is that the reporting season can actually be quite a volatile time. And so because people are coming out to not necessarily invest, but they're coming out to play with the sharp movements in price, [00:15:46][12.4]

Alec: [00:15:47] you know, there's there's a lot of chatter about, you know, expected result this and speculation that before they report, I mean, it's heaps worse in America. If you if you turn on an American stock market channel or business channel before one of the big companies like Google or Boeing or any of them report, they just don't shut up about what they expect. [00:16:08][20.9]

Bryce: [00:16:09] Yeah. [00:16:09][0.0]

Alec: [00:16:09] Yeah. Cuz you get to get a report and then. [00:16:12][2.7]

Bryce: [00:16:12] Well actually no it is ridiculous. Yeah. Yeah it is ridiculous and it's something to keep in mind because it's so easy to get caught up in, in this period. If you say US stocks shooting up, you've got to hold yourself back and just you know, remember that this is. Almost entirely based on market expectations and investor sentiment, and it's know the company's fundamentals haven't changed, I've just literally pulled out a piece of paper that says that profit or loss. [00:16:40][28.0]

Alec: [00:16:40] So it's a it's a it's a classic example of separating the signal from the noise. So there's a lot of noise around this time because people have the expectations built into the price. And you say price swings more than normal, but the noise is there. The noise is how companies are actually doing, how they're actually going in the market, how their new products are actually going, how much profit they're actually making. But around that, there's so much noise that just you need to block out because, you know, in two years from now, it's not all that noise isn't going to matter. What's going to actually matter is the signal how that how the company's actually going as a company. So I guess that's that's all very general. Maybe let's get into some specifics about this reporting season and what we've said. [00:17:20][39.9]

Bryce: [00:17:21] I'll kick off one with an example of what we were just talking about, how good results aren't always equal, a positive price measurement. And then perhaps we're going to see some positive results and something that sticks out. And probably one of the big stories is a company called Transurban, [00:17:36][15.3]

Alec: [00:17:37] the infrastructure company. They now a lot of people might not have heard of them, but everyone who everyone who lives on the east coast of Australia has dealt with them. They own basically all the major toll roads in Brisbane, Melbourne, Sydney, all up and down the eastern seaboard. So you've paid your tolls to them even if you haven't heard it. [00:17:57][19.6]

Bryce: [00:17:57] Yeah, well, we've definitely paid their tolls because the group generated revenues of two point seven billion during the 2016 2017 financial year, which was twenty two point seven percent higher than F1 16. Profits rose to two hundred nine million dollars. Now, that's operating profit compared to last year. That's an increase of eight hundred and fifty percent last year. They made 22 million dollar profit this year. Two hundred and nine million dollars now Ren. To me, that sounds like a company that was absolutely smashed it out of the park. [00:18:30][33.1]

Alec: [00:18:31] Roads are a good business to be [00:18:32][1.3]

Bryce: [00:18:33] with, business to be. And however, as a result, you would expect the stock price to go up. However, investors weren't too happy for some reason that with the results and the price fell, which you would find, which you would think is surprising. But it's an example of the expectations of the investors. Don't make the results that are put out by the company. Then they're going to reward you with selling your stock. So they weren't so keen on them was because they were doing a capital raising to try and get some money to fund more infrastructure development. [00:19:05][31.7]

Alec: [00:19:05] Yeah, so this was just some noise in the report, in the annual report and in some of their statements to the market that they're probably going to need to raise a bunch of capital to build the next sort of toll roads that they're currently bidding on, including the West Connex in Melbourne, which is going to be a huge one, which would generate revenue for them. They're going to have to come hat in hand to shareholders to ask for some money to do it. [00:19:27][21.7]

Bryce: [00:19:28] Yeah, well, the shares fell thirty one cent on the day that the results were released. So certainly not the result that I'm sure shareholders. Well, yeah. I mean, [00:19:36][8.8]

Alec: [00:19:37] you got to be you've got to be pretty stoked that they made two hundred and nine dollars million. That's like Kandanga. [00:19:41][4.6]

Bryce: [00:19:43] Hundred and fifty percent increase. Yeah. Unbelievable. Yeah. [00:19:46][2.7]

Alec: [00:19:47] Just people on people who never satisfied. [00:19:48][1.1]

Bryce: [00:19:49] No. And another example, Seek.Dotcom, the website that deals with finding the right people for the job, a classified website, they reported that they for the first time crack the one billion dollar revenue. Yeah. [00:20:04][15.4]

Alec: [00:20:04] Which is crazy to think about. [00:20:06][1.3]

Bryce: [00:20:07] I know it's it's a ridiculous figure for for a website and online company. And that's with figures of nine point one per cent growth from nine hundred and sixty million to one point zero five billion net profit of three hundred and sixty two million. And so, you know, things are looking good for sake. They've got a great market position and. [00:20:26][19.5]

Alec: [00:20:26] Yeah, I mean, well, you wouldn't go anywhere else to look for a job in Australia, really. It wouldn't be the first place that you went to. [00:20:32][5.9]

Bryce: [00:20:33] Classic example, though, the figure actually exceeded the guidance that was given by the company, but it didn't impress the investors enough. And the company today went down five percent. Yeah, it's a pretty big drop. But they say that that's because investors weren't happy with what the company was saying they were going to be doing going forward into the future with their estimates. They are saying the costs were going to be rising faster than their revenue. But look, if you were to say that you're growing at 10 percent, you've cracked the billion dollar mark, you've made three hundred sixty million dollars in net profit. Yeah, it's going to be rosy next year, but we're still going to be as good. And I got five percent so you can never repay. [00:21:10][37.5]

Alec: [00:21:10] So I guess it's probably important to explain that a lot of these companies, all share prices are priced for future earnings as well. So that's why, you know, you pay you might pay like fifteen times current earnings per share in the share price. And and that's because you. You buy these companies with the expectation that they'll keep growing or that they'll keep growing, essentially. That's why, you know, even if they're making three hundred and sixty million dollars a year, you know, if that if that's going to stop growing, then it's all about the price that you pay for the profit. And I don't actually know what they're trading in terms of how many times. [00:21:47][36.7]

Bryce: [00:21:48] I think it's quite hard, to be honest. Yeah, that's all. Yeah, that's all. [00:21:51][3.8]

Alec: [00:21:52] But look, to be honest, so many of these Internet companies like real estate, dot com, carsales.com sake, dot com, everyone has always said that bloody expensive and they always keep crossing it like, ah, they're, they're just I mean, they're not Internet monopolies because they all have competitors. Car sales, not as much, but, you know, they've all got competitive. It's just that their competitors can't really do much against them this year. [00:22:17][25.3]

Bryce: [00:22:18] Yeah. It's just one of those things I'm sure that the forward looking estimate are going to be saying, oh, we're going to be dropping from 10 percent growth to two percent growth. They probably said we're going to we've been growing at nine point one percent this year and next year we're going to forty eight point nine five, which is still right. [00:22:33][15.3]

Alec: [00:22:33] Like, you know, once you once you're in a market leader and you dominate the market, it's tough to you have to you have to expect the whole market to grow rather than for your market share to grow. I mean, hopefully for Facebook sake of people get fired and companies need to hire a whole bunch of new people. And there's people looking for work is. Yeah, that's what they need. [00:22:52][18.9]

Bryce: [00:22:53] So that's two examples that I had of the classic do well get slammed. Do you have anything? So yeah, I [00:23:00][6.8]

Alec: [00:23:00] guess the opposite all do well. You tend to [00:23:03][2.8]

Bryce: [00:23:03] do well, get slammed, [00:23:04][0.7]

Alec: [00:23:05] do well, get line is to get to look to be honest I'm just going to stop trying. But yeah it looks the opposite. Also applies to one company that saw its share price go up with Virgin Australia. And that was just that was despite it reporting 185 million dollar loss this year. Yeah. Yeah. [00:23:27][22.7]

Bryce: [00:23:28] My initial thought would be Virgin have almost consistently reported a loss. [00:23:32][4.4]

Alec: [00:23:33] Yeah, right. Yeah. [00:23:34][1.6]

Bryce: [00:23:35] So my thinking is that the reason their share price has gone up as a result of reporting one hundred and eighty million dollar losses because that loss is actually less than what it has been or less than what the expectations were. [00:23:47][12.0]

Alec: [00:23:47] Yeah, well, look, you're right on both counts. So their loss last year was two hundred and twenty four million dollars. So they've improved by thirty nine dollars million. So that's better than what the market expected. So their share price went up even though they lost one hundred and eighty five million dollars. So and it just once again shows that airlines are a hospice for most Australians. [00:24:08][21.0]

Alec: [00:26:01] There's one company that breaks records every time they report and they consistently do it every year. And that's Commonwealth Bank. And they broke records again this year. They had nine point nine billion dollars in profit. But yeah, look, to be honest, the the ability to say Commonwealth Bank is record breaking is just it is meaningless these days because every year they have the highest profit. And, you know, no Australian companies hit that. Profit level previously, and every year they creep up a little bit and it breaks the record again and it breaks the record again. So all this hype you hear about Commonwealth Bank, like, yeah, they broke they broke the previous record, which they held last year. You know, it really just taking as long as [00:26:40][39.5]

Bryce: [00:26:41] the share market reaction to them breaking profits year on year has substantially slowed down compared to what I remember it paying Ren five or six years ago. I remember they released a full year profit of seven point two billion or something, and that was just crazy. And the share market went nuts. It went up and up and proportionately, the increases that we're seeing on Commonwealth, well, I don't even know. I had to go up on the day. But as you said, what else can you expect now? [00:27:11][30.6]

Alec: [00:27:12] Yeah, I mean, look, they've also had all this trouble with the deposit machines in their ATMs and laundering. Yeah. And then their CEO has now sort of been stepped aside, shall we say. [00:27:25][12.9]

Bryce: [00:27:25] Yeah, respectfully told me that. [00:27:29][3.5]

Alec: [00:27:30] But look, to be honest, he's going to get a nice little golden handshake. He'll big [00:27:34][3.8]

Bryce: [00:27:34] time [00:27:34][0.0]

Alec: [00:27:35] or somewhere. I mean, say say what you want about the bloke, but, you know, if his responsibility is to his shareholders, he has well and truly shareholders. And he's seen the bank through some pretty big scandals and tough times. And, you know, mistakes like Commonwealth insurance and stuff, not not the strongest, the divisions, to say the least. But, you know, he just kept on delivering [00:27:54][19.5]

Bryce: [00:27:55] so he might need to jump on Tik-tok. [00:27:56][1.6]

Alec: [00:27:57] Yeah, yeah, yeah. I think a lot of companies will be asking for his services. [00:28:01][4.2]

Bryce: [00:28:02] Any other interesting ones that have reported so far? [00:28:05][2.7]

Alec: [00:28:05] Yeah. So Domino's reported today and got on today. [00:28:09][3.8]

Bryce: [00:28:10] The market, darling. Yeah. [00:28:11][1.0]

Alec: [00:28:11] Yeah. But look, Domino's is probably a classic example of investors were paying so much for future earnings that any sign that those future earnings won't pull through. [00:28:21][9.3]

Bryce: [00:28:21] Yeah. One slip up. You're out. [00:28:22][1.2]

Alec: [00:28:23] Yeah, yeah, yeah. So it look, Domino's fell, but if you've been a dominant shareholder for the last five years, you feel well. [00:28:29][5.9]

Bryce: [00:28:30] You fell eighteen point eight percent. Yeah. In one day. So that's a huge loss. They came down almost ten dollars or so. And then I think today they went up seven percent. So I made a bit of a back. [00:28:40][10.6]

Alec: [00:28:41] So that's probably a classic example of what we were saying before, where, you know, because there's so much short term trading going on, there's big overreactions to news and then there'll be a correction in the coming days. So, you know, big overreaction. It falls eighteen percent. The market realises that it's it's too cheap. It reacted too harshly and it will correct up seven percent. Now, there's just one last thing that I want to talk about when it comes to earnings seasons and annual reports and stuff like that. And that is a couple of buzzwords that you've got to watch out for, OK, because companies love to talk about how well they're going. Yeah. If they can massage the numbers and make it seem like they're doing better than they will do. Exactly. [00:29:18][37.6]

Bryce: [00:29:19] Because they're scared of investors slapping them. [00:29:21][1.8]

Alec: [00:29:21] Yeah. I mean, investors are pretty scary as a as a group. They're pretty ravenous and they will slam you if any bad news comes your [00:29:28][7.3]

Bryce: [00:29:28] way or if any good news. So what are some. So he wants to look out for this. [00:29:33][4.3]

Alec: [00:29:33] There's one or there's two that I want to talk about in particular. And it's it's all about the profit, the report, because that's the that's the big number. And companies, you know, profit, you think it's pretty easy money you brought in minus cost equals your profit, but you'd be wrong because companies have found ways to take that and then change it a little bit. So buzzwords to look out for adjusted net profit. Well, underlying profit. And essentially what that means is that they've taken a bunch of costs out of the the cost part of that money in minus cost equals profit equation. Yeah. So, for example, carsales.com, they reported that the adjusted net profit was up eight percent. But what they actually mean by that is that their profit was actually only marginally up from the year before. But when they take a whole bunch of what they're calling one of costs out of the equation, then it's up eight percent. It's the same with underlying companies will say, oh, this cost over here or that cost over there. That was only a one that doesn't the underlying profitability, that's just a one off this year. You know, they're right sometimes. Sometimes. But at the end of the day, it was a cost that year and it did affect your profitability. And as a shareholder, that does affect the amount of money that can be reinvested in the company or distributed in dividends. Yeah. And, you know, they're [00:30:50][77.5]

Bryce: [00:30:51] they're trying to fool, not fool, but trying to persuade the investors that, yeah, things are still going alright. [00:30:58][6.9]

Alec: [00:30:59] And look, to be honest, there's nothing wrong with it. Like, it is an important metric to sort of take away the one off costs and actually show how the underlying business is going. But as investors and as new investors, it's important to recognise the buzzwords and recognise what they need, say the distinction. Yeah, and if you say the underlying net profit is up eight percent, just have a quick look and say what the statutory profit is, which is because that statutory profit is because there are certain rules about the statutory number, the. Has to be reported statutory, made by law, so you just have a gays have a bit of a look understand some of those buzzwords, because at the end of the day, the companies don't have to trick you, but it's out to give you paint the best picture of the year that [00:31:39][40.6]

Bryce: [00:31:40] their resume for the year. [00:31:41][1.0]

Alec: [00:31:41] Yeah, exactly. You know, bonuses are at stake. Careers are at stake. Share prices are at stake. [00:31:46][4.5]

Bryce: [00:31:46] Not so. Right. Yeah. So that's a pretty nice wrap of some companies that have done well, haven't done well, being slammed, haven't been slammed just quickly. And if you want to get some information on this, all of the companies that report, as Ren has said at the start, release an annual report. And they also released investor presentations that are most likely given by the CEOs or the boards at some point to some major investors. And they're all uploaded onto the ASX in all the public to say. So if you're interested in any companies, that will also be put on your brokerage platforms. So if you're interested to see how your company is performing or if you've got any companies that you are keeping an eye on and likes more information than head to the ASX dot com and check out their annual report or their investor presentations, they usually do it in a sort of executive summary or a little bit of a slide show with all the important Kaizen stats for you. [00:32:36][49.4]

Alec: [00:32:36] If you want to check out the reports that are coming and follow when they're coming out, you can just Google company reporting dates. There will be lists on a bunch of different websites, but some of the big ones that might interest people, Blackmore's on the twenty third same as Westfield and Flight Centre, both on the twenty third as well. Coca-Cola Amatil, the Australian arm of Coca-Cola on the 25th. You know, there's heaps of companies. You scroll down the list and it will be household name, not a household name. So some really interesting companies to report. And, you know, it's a good way to say what companies are listed and what you can invest in. [00:33:09][32.8]

Bryce: [00:33:09] Yeah, some big dogs still to come. So I just want to give a bit of a takeaway action. And it's we've spoken in a few episodes about where can I find ideas about investing? Where can I find information and stuff? And this is a great period of time, as is the half yearly reports to sort of make a winners and losers list of stocks, especially the ASX 200, because they're the ones that you often see in the media the most. You might have to go searching for the lesser known ones because, as you said, Ren, all publicly listed companies do have to release results. But the bigger ones are also they definitely are always definitely in the media. And there's a lot of winners and losers list made. And it gives you a good snapshot of idea of where companies are up to. And you can start to develop your own lists and just sort of create a watch list going forward that you can keep track of and see how the markets react to these companies when they release results, have a look at their earnings and start, as you said, as well, Ren creating a thesis so that you can sanity check the thesis as you go along when they release a report. So this is a really good way to have the stocks in the media a lot there in your face. You know, if they're going well, if they're making money and I'll tell you what they're going to be doing in the years to come, they'll give you an update on the industry. So all the information in a very short period of time becomes available without you really having to search for option. And as we just said, they really are trying to sell themselves as well. So they want to give you as much information as possible. [00:34:31][82.0]

Alec: [00:34:31] So finding stocks and taking stock, you could see exactly Ren. [00:34:36][4.7]

Bryce: [00:34:37] Yeah. So that's a wrap, I think. Ren. Is there anything else you want to mention or discuss around the reporting season now? [00:34:43][6.3]

Alec: [00:34:44] Look, I think we set it all. And if people want to know more Googles their friends, there's heaps of information out there. So just get stuck in. [00:34:51][7.4]

Bryce: [00:34:51] Yeah, nice one. So, as always, great to be with you. Like on Facebook. Write us on our auctions. Give us a comment. It would really help. We've got some really exciting stuff coming up. Some guests in the pipeline that we're keen to get to you. We haven't had an interview for a while. Thanks for sticking around and we'll talk to you next week. [00:35:07][15.7]

Alec: [00:35:07] Sounds good. [00:35:08][0.3]

Speaker 6: [00:35:08] Equity out Equity Mates in the people appearing in this programme may have positions in the companies mentioned. This is general advice for me. Please speak to a financial professionals, understand how they pertain to your individual situation. [00:35:08][0.0]

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