Here’s the news of the week – and how we see it here at McAlvany Wealth Management:
How We Do What We Do
Earnings season has once again rolled around, and we thought it would be fun to give you an inside look at how we typically approach such an extremely busy time. Perhaps a “day in the life,” or an inside look at how our process looks in motion – the corporate reporting season edition.
We awake very early, arrive at our desks several hours before the market opens with our second (or for some of us third) cup of coffee for the morning, and begin to plan our day. First, we will peruse general news from the Financial Times, the Wall Street Journal, Bloomberg and other sources, reading for political developments and other issues that may have brewed overnight. Then we will read e-mails that come from the institutional sales “specialty” desks from the large sell-side research firms for the areas of coverage that give us perspectives on the various industries on which we focus or that may point us to company specific developments. We will then look at the earnings calendar and see who we have reporting on that particular day, and make sure the various conference calls we will listen to are on our calendar. We prioritize listening to the conference calls of our existing MAP holdings, and will generally listen to those live so that we are able to make timely decisions based on what opportunities might present themselves based on what we’ve heard versus the market reaction as the CEO, CFO and others involved on the call lay out their expectations for their business and make “forward looking statements.”
As a working example, perhaps we have a company that has had a bottom line “miss.” We will read the published press releases and financials to see what drove the miss. Is it a one-time transitory event that has no bearing on the ongoing operations of the company? Has the market overreacted to a relatively minor development? Or, has something impacted our initial investment case and do we need to make a risk management decision to make a sale? If we have more detailed questions based on what we heard on the earnings call, we might phone the investor relations department of the company and get clarification on anything we didn’t fully understand. We will then think about all of this information and put together something of a “mosaic” as we piece together what we have heard, and determine whether or not the value of the underlying company is still what we believe it to be. In the days ahead, we will wait for the 10K or Q to be filed and read that; often you will find information disclosed in the SEC filings that is not disclosed on the call or in the press release and presented financials. We might also read anything published by the sell-side, although in general we tend to find it a rehash of the press release we have already read and therefore not particularly useful. We will make notes in our research files on any new developments and key future events to watch. This is all what is required to do proper “maintenance” on existing portfolio holdings. It can often feel like drinking from a fire hose, as earnings season tends to be condensed into a few weeks, and the amount of information being released is tremendous.
As the day begins to wind down, we will begin to prepare for what is ahead. We will see who we have reporting for the rest of the week and understand what the market expectations are for companies. We will listen to conference call replays for companies under coverage that we might have missed due to a conflict in timing with a portfolio holding. Another check of the news after market hours is also prudent. By this time, we are mentally weary and are ready for a bit of a break from all of what we have learned that day so that we are ready to tackle the day ahead.
We thank you for your interest and greatly appreciate your continued support.
Best Regards,
David McAlvany
Chief Executive Officer
MWM LLC
