Best of Substack: Capitalist Letters / Earnings Mania: Please Stop Listening to Noise

Want to highlight some of the best articles I have come across on Substack - not just my own. I thought this article was excellent: https://open.substack.com/pub/capitalistletters/p/earnings-mania-please-stop-listening?r=2bzcf5&utm\_medium=ios 🏁 Final Words I hate earnings seasons because they make so much noise. The secret of being a good investor is being able to disregard the noise, believe in your own knowledge, and concentrate on what matters. To do this, you have to internalize a few things: A single earnings print rarely gives a valuable signal. You must have a deep and independent knowledge of the business and circumstances that may affect it to get a signal. You must have an investment thesis so you can know whether a signal breaks the thesis or improves it. Not all negative signals are thesis breakers. Take Pagaya. Slowing growth is a negative signal in and of itself, but when thought in the context of the business’s previously high markdowns and economic uncertainty ahead, it’s a positive signal that says that the business is committed to not repeating old mistakes again. It’s hormesis. Please stop stressing yourself over single earnings prints. Know the KPIs, ask yourself whether they are moving in the right direction. If not, ask yourself what the likelihood is that deterioration will be permanent? You may not know this right away, but you’ll likely have to follow a few more reports; but this is what being an investor takes. Even when there are negative signals, and they may be permanent, you should still assess whether they break your thesis or your valuation is already conservative enough to tolerate it. It’s very hard to understand all this from a single print, so don’t be so harsh on yourself. Look at the trends rather than point-in-time numbers. Get yourself some sanity while everybody else goes insane. Otherwise, you’ll always be dependent on what the market decides about a stock. And I know nobody who followed the market and ended up doing better. My sincere recommendation to you is to start hating earnings seasons. The more you disregard point-in-time prints and base your analysis on long-term trends, the better you’ll do. I sincerely believe this.