The Impact of Reporting Season on the Stock Market

Bryce: [00:01:12] Welcome to Get Started Investing feed in this podcast, we cover all the basics you need to start your investing journey. We unpack all the jargon and confusing bits here, your investing stories with the goal of making investing less intimidating. And we want you to have a good time along the way. My name is Bryce and as always, I'm joined by my Equity Mates Ren. How's it going, bro? [00:01:33][20.5]

Alec: [00:01:33] I'm very good. Bryce we're back on this. [00:01:35][2.1]

Bryce: [00:01:35] We are back on this feed. Yeah. We've had the Get Started Investing feed podcast live since the end of 2019 with that 12 part series that we did. And then we've subsequently launched the broker BASIX, which was just done with Superhero. We teamed up with Beta shares to do ETFs for beginners, and we also had Rohana on the show to walk us through his investing journey over three episodes with with concept rookie [00:02:03][27.8]

Alec: [00:02:03] Roanne still riding high from the still ride away with him over New Year's and he wouldn't shut up about I know, [00:02:12][8.6]

Bryce: [00:02:12] loving it. We will get him back on I think, to see where he's at. I was chatting to him over the New Year break and he is still investing, which I'm surprised but good on him. So he's he's still putting money away on a regular basis. But let's just firstly start with the twenty twenty one. He's going to play out for years. Yeah. So we've recognised that there are a number of episodes and topics in the investing world that we should be covering on here and have really been focussing on our main podcast, Equity Mates Investing podcast. So we're now going to commit to a weekly episode on the Get Started Investing feed podcast where we really just break down one topic, no jargon, super basic to try and make investing less intimidating. So that's the goal. And we're going to commit to that over the next 12 months. [00:02:59][46.2]

Alec: [00:02:59] Always keep it super basic. So if you're new to investing and you don't know where to start, we want this to be the place to start. If you're a fan of Equity Mates and you want us to go more advanced to bat on this field, come across to the main Equity Mates feed because we really want to make sure that people who want to get started have a place to get started. [00:03:22][22.6]

Bryce: [00:03:22] That's right. Yeah. So additionally, we will be launching a new email that will come out in conjunction with the release of these episodes every Tuesday. So make sure you head to Equity Mates dot com to sign up to that as well. If you're in our Facebook group or joining our Facebook group, there will be an opportunity to put your details in to sign up to that email as well, so that email will accompany this episode with some very basic written content to support what we're talking about today. If you do want to come on the show, we really want to hear investing stories from beginners and really help. I guess you walk through the barriers that you might be facing. We would love to to have you on and do a row home to point out. [00:04:07][44.6]

Alec: [00:04:07] Yeah, yeah, yeah. I think for us the Rohana episodes were great because, you know, we we know there's questions that we had when we started, but everyone has a different, you know, background before they start investing. Everyone has different questions. And so rather than Bryce and thinking about what we think we should be talking about, we really want to hear what you guys have in terms of questions or what challenges you are facing or challenges you've overcome. So, yeah, we want to we want you to head to Equitymates.com/contact, fill in the form there, and hopefully we can get you on the show. [00:04:42][35.6]

Bryce: [00:04:43] Yeah. Alternatively, if you have topics, suggestions, contact@equitymates.com to email or as Alex said, Equitymates.com/contact to hit us up. So Ren let's crack into it. [00:04:54][11.3]

Alec: [00:04:54] Yeah. [00:04:54][0.0]

Bryce: [00:04:56] We'll keep these short and sharp and super basic jargon free. Hopefully we'll pull each other up if there is some jargon, this jargon alert [00:05:02][6.0]

Alec: [00:05:02] we need like a big [00:05:03][0.5]

Bryce: [00:05:03] automatic so reporting season. [00:05:07][4.0]

Alec: [00:05:08] Yeah. Which is an interesting topic to start with and we may already need to blow the jargon. Air horn when you said reporting season. Yes. I guess two questions for you to kick things off. First of all, what is it? And then second of all, why are we starting here? [00:05:25][17.4]

Bryce: [00:05:26] I'll start with why are we starting here in Australia? We're about to head into reporting season. So if you are on your investing journey and you might be reading the Afar or seeing a lot of commentary online, it's likely you'll see a lot of activity in the space around reporting season. So we want to unpack in a simple way what it is. Yeah. And why companies do it and why it matters for investors or if it may be. [00:05:54][28.1]

Alec: [00:05:54] Yeah, yeah, yeah, yeah. [00:05:55][0.9]

Bryce: [00:05:55] If it matters for investors, [00:05:57][1.2]

Alec: [00:05:57] for a lot of investors, you can actually just ignore reporting season. Yeah. Which is one of the things we want to convey in this episode if you do need to worry about it or not. You answered one of my questions that you didn't answer the other one, so [00:06:13][15.2]

Bryce: [00:06:13] which is what is [00:06:14][0.5]

Alec: [00:06:15] what [00:06:15][0.0]

Bryce: [00:06:15] is so reporting season is a period during the year where companies that are publicly listed will release their financial results. [00:06:24][8.5]

Alec: [00:06:24] Nice. And I think if we can take a step back, you know, in our 12 part Get Started Investing feed series, we spoke about how when you invest in a company, you become a part of your company and you are you know, you're a shareholder. You own part of the company. The company needs to keep you up to date with how they're going. You know what what they've done over the past year, what their plans are for the future. Are there any major changes to, like, who's leading the company, the board or anything like that? And what reporting season is, is really when all companies that are public that you can invest in go to the public, go to all their shareholders and say, you know, this is how we're going. This is this is what we're doing. This is you've [00:07:10][45.8]

Bryce: [00:07:11] they start every report with you. [00:07:12][1.5]

Alec: [00:07:14] Maybe they should. Maybe they should. And so you'll hear a lot of jargon around reporting season around. Well, you know, like what are their earnings, you know, different growth metrics are estimates. Did they beat estimates? Was where did it measure against consensus estimates? Like we'll unpack some of that in this episode. But if you strip it back and you ask what the hell is going on here, at the end of the day, it is because these companies are owned by the public. They have a responsibility to tell the public how they're going. And in Australia, most companies do that twice a year, generally in February and in August. [00:07:53][39.2]

Bryce: [00:07:54] Yeah, good point then. So that is the time in Australia that you can expect to see. Results are slightly different overseas in the US, US companies depends which way you look at it, but from our point of view, unfortunately, report quarterly. So every three months they have to push out a report. So you've got sort of mid we've just seen some reports come through April, July and October. [00:08:20][25.3]

Alec: [00:08:20] So let me let me ask you about that. As a part owner in the company. Don't don't I want to be updated more frequently. Like, why would you say? [00:08:30][9.1]

Bryce: [00:08:30] Unfortunately, it's a good question. And without going too deep, because the market reacts so strongly to reports from companies and because I guess the management of companies always want to see their share price go up because they're forced to report quarterly and knowing that that result, that that report will likely impact their share price, it impacts their short term thinking, [00:08:56][25.9]

Alec: [00:08:57] so it affects their share price. But more specifically, it will also then affect how these company executives look, how much bonus they get and stuff like that. [00:09:06][9.3]

Bryce: [00:09:06] So they're incentivised to run the business with their short term focus. Yeah, if they reported once every five years, then they don't need to worry about having to worry about their share price for five years or so. [00:09:19][12.3]

Alec: [00:09:19] And if you if you think about like the your corporate job or, you know, whatever, whatever job you're doing or if you run your own business, if you think about how long things take to happen, it's very rare that you have an idea, you implement it and you say results in three months. Things take things take time to develop, to plan properly, to have a solid strategy in place. And if your executives if your bosses are like, we've got a report again in two and a half months and we need to show more profit and everyone's scrambling to try and hit that three month deadline, things are rushed. Yeah. You want you want to you know, we in we in this podcast across Equity Mates, we talk about long term investing and you want your companies to think long term as well. So that was a little bit of a detour. Maybe that. But that's why you I guess you said unfortune, unfortunately. [00:10:12][53.1]

Bryce: [00:10:13] Yeah. To close it out as well. Europe, similar to Australia and their companies, they report half yearly as well. So same as us in August and as well in February. So we are about to go into our reporting season here in Australia. [00:10:28][15.6]

Alec: [00:10:29] Now, I'm going to ask the most important question of this whole episode. And for any beginner investor thinking about reporting season, this is the number one question. Do I need to worry about it? [00:10:43][13.3]

Bryce: [00:10:44] No. [00:10:44][0.0]

Alec: [00:10:45] Well, OK, there's probably a little bit more nuance on that. [00:10:50][4.9]

Bryce: [00:10:51] Yeah, if you're investing in an ETF or a managed fund. No. If you're investing in individual companies, it's worth paying attention to, but I don't think it's worth necessarily worrying about if that makes sense. [00:11:09][18.2]

Alec: [00:11:09] OK, worry, worry might be the wrong term. Is it worth looking at? [00:11:14][4.3]

Bryce: [00:11:15] It is worth looking at. [00:11:16][1.0]

Alec: [00:11:16] Yeah. I think as if you're if you're going to make the plunge into individual companies, it's a really important source of information because it's the company telling you how it's going. All the other news articles that are written about it throughout the year, a lot of it speculation, you know, a lot of people thinking about what's going to happen or reflecting on what has happened. But the company telling you how it's going, giving you its actual numbers is a really useful and important piece of information. If you want to invest in individual companies, but you can live a long and happy investment life and you can make good returns over the long term by just investing in ETFs, which we spoke about in the 12 part series, where you just invest in the whole market. And if you're investing in the whole market, it's not it's not so important what each individual company is doing because you're just making a bet or you're investing in the overall productive capacity of the of a market improving. [00:12:17][60.6]

Bryce: [00:12:19] So Ren, you mentioned that they're letting you letting the investors know what they're doing to be a little bit more specific. Really, what you're looking for in reporting season is their revenue or how much money they made or generated and then also profit line, which is how much money they made off to triple their costs out. And then you'll often see other key metrics that are relevant to the business. So, for example, if Afterpay to a report, they would probably be letting you know how many new customers they have on their platform, how many new suppliers they have on their platform. So you just got to have you've got to be aware of what metrics matter for your company. And they're likely to report on changes in that. [00:12:59][40.4]

Alec: [00:12:59] Yeah, yeah. [00:13:00][0.5]

Bryce: [00:13:00] So we will quickly jump to another break to hear from our sponsors and then get stuck into what it really means for investors. Ren, you are all about getting fit. You've bought the Garmin, you bought the Gulf membership, you bought the gym membership and you're on the My Master Chef. And even in lock down last year, you bought those resistance bands of Instagram that from memory didn't even come. [00:13:22][21.1]

Alec: [00:13:23] No, look, they didn't come. But all of that effort really was cancelled out by the numerous menu log orders that were a real staple of my lockdown experience. [00:13:32][9.5]

Bryce: [00:13:33] Well, we've just headed into a new financial year, so I think it's time you get money fit with Virgin Money, our latest sponsor. [00:13:40][7.0]

Alec: [00:13:41] That's right, Bryce with a high interest savings account bundled with a seriously rewarding everyday transaction account. You can manage your money easily on the go smash your savings goals and be rewarded for it. [00:13:53][11.9]

Bryce: [00:13:53] And with the Virgin Money Go transaction account, you can earn rewards on your everyday spending with zero monthly fees. Sounds like just what you need. Ren. [00:14:03][9.3]

Alec: [00:14:03] Yeah, the FBI. Twenty one get Ren. It didn't quite work, but if y twenty to get Ren money it might be to go [00:14:12][8.4]

Bryce: [00:14:13] back to your own bait. Virgin money terms and conditions and monthly criteria apply. Now let's get back to the show. Nice Ren, so I have a question for you. You've said, does it matter for investors? And yes, it does, because the company is letting you know what's going on. But often when a company reports its share price does crazy things. Yeah. So how how do you think about that? And also why why does it do crazy things? [00:14:39][26.9]

Alec: [00:14:40] So there's a whole industry, the finance industry, that are paid to make predictions on companies. So, you know, there will be analysts, all these major investment banks that Goldman Sachs, the Morgan Stanley's, you know, all of those big institutions, there are people there who try and predict what a company is going to do. They you know, you talked about Afterpay before. They'll say something like, well, Afterpay made a hundred bucks last report. And I think they're going to make one hundred and five dollars this report. And then all of these different investment banks are making these predictions, estimating what's going to happen, and then the market starts to build a consensus around wall. Hey, everyone saying Afterpay is going to do a hundred and five if Afterpay then actually released their results and they've done 101. Afterpay is grown, it's gone from one hundred to one hundred and one, but everyone's like, what the hell we thought it was going to do one hundred and five and people had bought more shares on the expectation that it was going to be one hundred and five. And so because everyone thought it was going to be higher, everyone thought it was going to be a hundred and five, the price will go down because what Afterpay did, even though they grow, wasn't as much as people expected them to grow. And so every company has this. They have a whole bunch of analysts that are paid to make predictions about what's going to happen to forecast the future and how close the company gets to hitting those estimates. Well, then through crazy things with their share price, you know, if they beat estimates, they might go up even if they actually didn't have a good, good growth or anything. And so when you're looking at reporting season, it's really important to separate what I guess I would say, separate the signal from the noise. And what does that mean? Signals the important information and the noise is just all the static around it. And for me, what people are estimating and how the market reacts based on those estimates is all noise, because six months, six years, 60 years, if you've got that long until you retire down the line, what's important is how the actual company is doing. Yeah. Did Afterpay grow from 100 to one hundred and one? Will it grow to one hundred and two? Will it keep growing after that? Yeah. The fact that someone at Goldman Sachs thought it should be at 105 isn't going to matter in three years. Yeah. So, I mean, there are reasons why the finance industry makes these estimates and like they you know, they're not useless. But for everyday investors like you and I and like most retail everyday investors out there, estimates are noise. And what it matters is how the company itself is actually going. [00:17:38][178.2]

Bryce: [00:17:39] So I've just started my investing journey. I've bought Afterpay. It's, you know, going well. They just released their results whilst they've grown from 100 to 101, you know, uses the market was expecting one hundred and five. Their share price falls. [00:17:57][17.4]

Alec: [00:17:57] Yeah. [00:17:57][0.0]

Bryce: [00:17:58] What do I do as an investor? [00:17:59][1.0]

Alec: [00:18:01] Well, if nothing's changed. So if you if you did your research on Afterpay and you bought it because you thought in the next 10 years it would be able to be the number one buy now, pay later player in Australia and it would go from one hundred to a million. The fact that it's continuing to grow is a good sign, regardless of what the share price is doing. [00:18:25][24.7]

Bryce: [00:18:26] So forget the share price. Don't react. [00:18:28][1.8]

Alec: [00:18:28] If Afterpay came out in their report and said, well, they have to start with you. So you guys are actually not doing by now pilade or any more. We're thinking credit cards might be a way. And if you bought them because you thought they were going to be the biggest by now, pay later, well, then something's changed. You know, they've changed what they're trying to do. And the reason that you bought them is no longer what the company is doing. So in that instance, then you should maybe sell because what what the reason why you bought it doesn't hold anymore. But if they're continuing on the journey and, you know, they might not be growing as fast as the market wants, but they keep getting more customers, keep making buying our pilot a more more of a thing, then there's no reason. There's not nothing's changed with the business itself. Yeah. [00:19:17][49.3]

Bryce: [00:19:18] Yeah. So that's the key. You will inevitably find that during reporting season there is a lot of activity on the markets. Your portfolio is likely to experience some pretty good days, potentially some bad days. And there's going to be some pretty significant moves in the stock price of your companies. But try to remove that noise if the underlying fundamentals of the business has not changed, if you're still seeing growth. But it's not meeting market consensus. As Ren said, there's a guy or a woman paid just to come up with what they think their stock price is likely to be or the growth of the company is likely to be. Just disregard all of that and really just listen to what the company is saying more than anything. So Ren to close it out. Where can we find information about reporting season? What sort of information are we finding? [00:20:09][51.7]

Alec: [00:20:10] So this is a good this is a good question because there was another source of noise. And I think this this will lead into it. So the right answer to your question is the companies publish it on their websites themselves. So every company has an investor relations part of their website, and they'll have they'll generally have a PDF document, like a written document that explains it all. They'll generally have then a slideshow presentation that has like. It's like a presentation that takes through the key numbers, the key messages, sometimes that will be like an Excel workbook with actual raw numbers, but there will also be raw numbers in the written report. So the company itself will publish that information, make it public, and you can get it that way if you follow the company through, like the ASX website or something. All of that information will be made as an ASX announcement. It's called. So you can find it that way. You can also get it through the media. Now, there are some don't get this wrong. There's some great journalists out there and they can look at these numbers, they can look at the story and they can draw some really important insights that can really help you better understand what's going on. So I don't want to say that you shouldn't read the media. You just have to take it with a grain of salt. Yeah, the the business model for the media is to maximise clicks or downloads or views. And a headline of Afterpay grew from 100 to 101. You know, continuous steady growth is pretty boring. It's not going to get heaps of clicks. The headline Afterpay Disappoints and share price collapses is much more likely to get clicks and views. And if you're going to read stuff in the media, you just got to keep that in mind that they get paid to be sensationalised, like all their incentive structure is leaning towards making mountains out of molehills. And if you want to think long term, you really got to, again, separate the signal from the noise or just take it all with a grain of salt. [00:22:21][131.2]

Bryce: [00:22:22] So the final piece, if you are looking for when your company is reporting, there are some reporting season calendars available both for the Australian market, the US market and the European market. Simply just go to Google and search reporting season or earnings season jargon alert. The Americans call it an earnings season, just Google earnings season calendar, a reporting season calendar. And you'll find out generally when your company will be reporting. So that kind of brings us to the wrap of reporting season Ren. We do have a community call out, though, and that is that we need your help. This podcast, Get Started Investing feed, is all about helping beginner investors break down barriers, which we mentioned at the start of the show. But the best way to work out what those big hurdles are is to hear directly from from you guys, the beginner investor. So we're asking for you to share your story with us. It's really simple. Head to Equity Mates dot com forward, slash contact and leave your details or a voice message. Ren. Has Hodda hardcoded this ability to record on our website and it'll just flick through a recording to us so that we can get in touch about you being on the show. We really want to hear from you. So. So don't be shy. And remember, there is no such thing as a stupid question here on Get Started Investing feed. At Equity Mates as a whole, we we're all on this journey together. [00:23:46][84.4]

Alec: [00:23:46] So if there was such thing as a stupid question, Bryce and I would have [00:23:50][3.2]

Bryce: [00:23:50] I'd be out of a job. [00:23:51][0.5]

Alec: [00:23:53] We've asked many an expert, many a stupid question in our time and we're still here. [00:23:58][4.9]

Bryce: [00:23:59] So those links, Equity Mates, dot com forward slash contact will be in the show notes. And just a reminder that we also do have the Equity Mates investing podcast available. Should you feel like you're at a stage where you want to come across and listen to a bit more intermediate level conversation, but [00:24:16][17.9]

Alec: [00:24:17] definitely not [00:24:17][0.5]

Bryce: [00:24:17] advance intermediate. But look, we really do need your help. We'd love you to come on the show, share your experiences and stories, and we can break down some barriers for you and with you that I know many of the other Get Started Investing feed members will appreciate. So it's been fun. Ren Tik-tok of twenty twenty one, happy [00:24:37][19.7]

Alec: [00:24:37] reporting [00:24:37][0.0]

Bryce: [00:24:38] season, happy reporting season. And we will be back next week with another investing topic that we're hopefully going to break down for everybody [00:24:46][7.8]

Alec: [00:24:46] or we will break it down forever. [00:24:47][1.1]

Bryce: [00:24:48] But we will. [00:24:48][0.2]

Alec: [00:24:48] Yes, none of this. [00:24:49][0.9]

Bryce: [00:24:49] Hopefully not. So we'll leave it there in chat next week. [00:24:53][4.1]

Speaker 3: [00:24:54] Nice on this podcast, proudly brought to you by Equity Mates Media. Always remember, the only information contained in this podcast is education and entertainment purposes only. It is not intended as a substitute for personal financial label attacks of Bryce of Equity Mates financial professionals. And I'm not aware of the personal financial circumstances. Before making any financial decisions. You should read the product disclosure statement and if necessary, consulting licenced financial. More information, head to our discussion page where you can find resources to search for a registered financial on. [00:24:54][0.0]

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