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Crocs Inc. (NASDAQ: CROX) just reported decent earnings, getting everyone excited about international growth, but just missing analysts expectations and causing their stock to lose 12% and already I'm seeing tons of bloggers, traders and "market experts" defending the stock here. Sure, they might be right, if you want to better your odds of success and not play the ridiculously random guessing games most investors and traders seem to enjoy playing, don't fight an earnings move especially a momentum stock's earnings move. Momentum stocks have special qualities that vex investors -- especially value investors --because it's not just about the physical numbers, it's about expectations. Everybody has different expectations and a momentum stock's subsequent price action is the result of how the actual earnings results mingle with those expectations. Don't be foolish enough to believe that your own personal beliefs, expectations, thought process and conclusion matter in the least. I don't care who you are, you matter little to the stock price.
While it's true that every now and then a substantial earnings move reverses, at least to some degree – like fellow momentum play Chipotle Mexican Grill (NYSE: CMG) did last Friday, bouncing up from $95 to $105 -- the vast majority of earnings move stick and the stocks tend to move in the same general direction for days and weeks to come. Cisco Systems (NASDAQ: CSCO) managed to recover nicely off its weak future guidance, but less than a week later, it's given up most of those gains.
After all, while it takes time to digest all the numbers, biases are created and those biases influence firms, traders and brokers for or against a company until the next set of numbers are released, restarting the whole expectations games.
Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund
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Reader Comments (Page 1 of 1)
2-20-2008 @ 10:46AM
idontwearcrocs said...
boring
2-20-2008 @ 10:47AM
idontwearcrocs said...
boring
2-20-2008 @ 1:36PM
Crocsaregreat said...
Great product, amazing profit margin, amazing growth potential.. Don't buy the stock if you don't like money.
2-20-2008 @ 1:44PM
Crocsaregreat said...
Great Product, amazing profit margin and a mountain of growth potential.. Don't buy the stock if you don't like money. 9 straight quarters of beating earnings estimates. Yeah, it's a real loser...
2-21-2008 @ 11:46AM
x said...
once again crox has screwed there share holders!
2-28-2008 @ 11:27AM
Grandpappy said...
I agree we are being screwed by the company.They are not letting the stockholders know all the skinny on what's happening .I bought last year when it was starting to grow and then when it dropped in price I sold and then bought back a lot smaller amount and now it has started down again.When mine gets to the breakeven point I may sell what I have.
3-04-2008 @ 11:18AM
x said...
why doesnt everybody just short the stock to zero were it belongs the company certainly doesnt care about the share holders they have made millions and screwed they share holders along the way
3-05-2008 @ 3:01PM
x said...
keep bringing it down from 75 in october to 20.76 today were almost there another 20 dollars and then every body will be done with this rip off company
3-13-2008 @ 5:34PM
Adele Roberson said...
wHEN WE BOT CROX AT 3 AND HELD IT THRU 66 EVERYONE THOUGHT MANAGEMENT WAS SO FINE.
NOW THE STOCK IS DOWN AND MANAGEMENT IS A BUNCH OF CROOKS.
NOT SO.
THIS HAPPENS WHEN COMPANIES GROW VERY FAST.
YOU ALL NEED TO R ELAX ND NOT START BLAMING THE COMPANY BECAUSE YOU OBVIOUSLY BOT AT THE W RONG TIME.
3-13-2008 @ 6:05PM
ADELE ROBERSON said...
tUESDAY 3/11/08 BARRONS.....
SHARES OF CROCS ARE trading at a fraction of their highs in late 2007. But one director thinks the footwear company still has legs, and has stepped up with a $5 million purchase.
On Thursday director Michael Marks purchased 250,000 shares for $5 million, an average of $19.94 a share. He now owns 1.5 million shares, including 1.2 million held indirectly through an investment firm where he is a managing member. Marks, who has been a director at Crocs since August 2004, holds 3.6% of Crocs stock outstanding.
3-13-2008 @ 6:12PM
ADELE ROBERSON said...
Crox grew at warp speed.
There is nothing wrong with the company... it is just re-grouping, that is what stocks do when the company is growing so fast.
Do not be so fast to condemn. almost six million shs traded today, 3/13 and the stock went up... obviously many people are buying it.
3-17-2008 @ 3:19PM
x said...
they musty need alot of regrouping the the stock went below 18 to day 17.65 to be exact and management is a bunch of crooks they just to wait to say they have an inventory problem the day announced earnings ! and they just happen to sell there stock at 75 a week before earnings came out knowing they had an inventory problem then the stock tanked the 5 major players mad approx 2720000.00 not bad! ask the share holders how they made after they had annouced there earning after they had already bailed out sounds like martha stewart when she sold her stock but had no idea the company was doing bad before the stock holders did instead of the government wasting time casing governers with hookers they should be chasing these company brass who are ripping of the american public time and time again
3-17-2008 @ 3:27PM
x said...
sorry for my spelling
3-17-2008 @ 3:30PM
x said...
oh sorry i was wrong 17.65 it just hit 17.00 keep selling it short by next week at this time it should be down to 10.00!!!!!!!!!!!!!!!!!!!!!!!!!!! and the week after down to 2 dollars once again id personally like to thanks crocs management for sticking up mine and the rest of the share holders asses!!!!! while they made hundreds of millions and our goverment is to busy chasing governor who are chasing hookers instead of these crooks