Timeline
- 20280430 – Bought into position at 162 –
- 65 shares
- 20180430
- 20180501 – Doubled down at 164 –
- 400 shares
- 20180501
- 20180502 – tripled down at 168
- 200 shares
- 20180502 – after hours
- shares drop to USD156 from USD170
- miss target revenue by USD0.2billion
- total loss in market cap – USD3billion
- percentage loss of market cap % – 10%
lessons learned
- Beware of greed – Trading with the expectation of good news upon good news is asking for trouble
- Don’t make bets on the unknowns
- Don’t chase after momentum
- stick to strategy of loss aversion and reversion to mean
- market over reacts with missed earnings
- trade on the position after
- company missed earnings
- company’s revenue and earnings grew substantially YoY
- Don’t double down on a bad decision
- only double down if the fundamentals are strong and Wall street temporarily miss priced
Moving forward
- To study crowd behavior of the following earnings missing episodes
- Positive examples – fundamentals were strong
- Spotify – 20180502
- Netflix – 20171017
- Negative examples – fundamentals were weak
- Snap – 20180501
- Positive examples – fundamentals were strong