Guys I need some insight into my investment logic and would like people to comment and see if I am crazy or not.
Goldman Sachs is releasing their earnings report on OCT 19 at 8:00 am.
I believe that due to the rally last month, and the stock being undervalued that it is poised to go up.
However I know that there are those who think the opposite and believe that the earnings report is going to show a less than or neutral position and will want to get rid of their stock and not have cash tied up.
However there are guys like me who think that the earning report will show a better than or marginal improvement in revenue and will be poised to purchase stock.
Now simple economics of supply and demand dictate that from now until OCT 18 at 4:00 pm the day before OCT 19 the earnings report comes out, people will position themselves depending on what they expect the future to be.
So by 3:50 pm on OCT 18th people will be locking in their final positions, either selling or buying in a last minute attempt for the OCT 19th earnings report release since its released at 8:00 am the next morning that will be the last time to trade the stock before the report comes out.
Now if there are more people who think that GS will go up and earnings report will show a upswing then between today and OCT 18 the stock price will rise as there are more people looking to buy than sell. Simple supply and demand
However if there are more people that believe that the stock will not fare well then there shall be a steady price decline between today and OCT 18.
The questions becomes, how do I get the market temperature. If I believe more people will think that the stock will go up then I should buy the stock today because it will be cheaper today than the days that get closer to OCT 18.
However if more people think that this stock will not fair well then it will be a cheaper buy at a later date closer to OCT 18.
My goal is to buy GS at the lowest price obviously, with the expectations that once earnings report comes out on the 19th that the stock will see a increase for a day or two and then I sell it to those who feel like they jumped off the wagon too soon.
As a private investor how does one get a sense of what other investors are thinking and predicting, I understand to some point its not possible but just a general sense.
My second question is that the recent stock market rally that we observed in the last month of September, GS must have made profit the Dow Jones had quite an upswing.
However I know that accounting departments are slow and if a report needs to be delivered they might just leave the last month out and make it part of the next report. To be honest Im not to acquainted with accounting principles and I am not sure if the profit that I am predicting GS made in the last month will show up on the report.
My hunch tells me most people will think that it will perform poorly and not beat street estimates, so they will sell. I also think that the report will show a marginally better than expected return or just meet meet street estimates.
Thats why I am going to wait and watch the price of GS and predict that between now and OCT 18 it will fall and buy when it gets closer to OCT 18.
Comments?
Your thinking about this the wrong way. If anyone knew what anyone else was thinking then people could predict stock prices and make millions. Obviously there are smarter people than you or I who do this, but the odds that you can do this on GS without inside information is essentially zero.
What you gotta do is be creative. What are secondary affects of GS coming out with good or bad earnings? Does this mean that the markets they participate in will rise or fall? What other positions are there out there that might be affected by this report? Gotta get creative.
hmm.. I see your point. Ripple effect.
Well to understand the effects that GS has on other secondary markets you have to first learn which companies or investments that GS has bought into recently.
It could also be that since GS did better they might invest in an industry that they think is poised to go up. So I need to figure out which industry are they positioning themselves to buy or invest into.
Yahoo finance offers these reports on GS for 10.00 I wonder what kind of information I could gain from that.
I say BUY. Reason: they lost 25B market share and paid $500M for it, so back of the envelope numbers do not add up and the stock is highly undervalued. If I were you, I would BUY! Boo-yah! :P
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