Not yet done with my companies, but I think I called almost every company under my coverage wrong this week. PMs look pissed. You’d think LO funds would be more long term but nothing like a profit warning 2 months away from YE to get people abandoning strategy. I caught one of them doing technical analysis on Apple earlier, got no idea what hoped to gain from it
We’re not talking blowups here, but it only takes slight changes to guidance to trigger 10% drops nowadays & when the index is up 15-20% that delta is tough to hide from. Not much hope for saving the year at this point, December usually has weaker vol and unless one of these conferences pulls a surprise I don’t see any way to save this.
If this resonates, anyone have any advice?
Why were you wrong? Did you just expect the company to under/overperform or were you short a stock you were supposed to be long?
If you want specifics, I was long a bunch of European companies who’ve profit warned off the back of weaker china in the last month. I thought I timed the china trade well by being late to it, feels like we’ve got another leg down in some areas
Ouch. Phillips?
Tough - S&N?
When did you go long Europe? And why?
Did you overlook or not give enough weight to the highlevel macro factors?
did you check the 5.5-year stacked comp?
have you considered being better at your job?
Just have to refocus on the process and keep swinging. Sounds like there was a recurring theme with all your losses.
also PMs say they care only about process until the outcome is not good. Then forget the process it’s all about the outcome annoyingly
How is it possible to consistently make the wrong call when over half of SP500 companies beat earnings. Unless you cover renewable energy companies
I don't think you understand the difference between getting the EPS number right and getting the stock reaction right.
EPS beat =/= positive stock reaction
yeah dude what lol, how are u going to say ur in ER and say this…..in reality this earnings season has been a lot worse than previous ones from a top-line/margin perspective, w a lot less visibility into 25 than many people thought. for most companies, eps is like the 4th/5th most important metric
It’s ok, it can happen. Quickly assess why you were wrong (were your bets all the same underlying one?), but don’t dwell too much on it. What are the things you tend to do when you get something right?
tbh you're cooked
Hey - ignore some of these guys above. This is a tough industry. You’re going to get stuff wrong and sometimes you’re just offsides. My advice is figure out what you got wrong. The only way to course correct is to properly identify the source of your mistake. Then you just have to put your head down, be resilient, one step forward at a time. You sound earlier on in your career so you probably just misunderstood the stocks.
Hang in there... We all go through this. How you handle drawdowns is more important than anything for longevity in this business.
It's difficult, but, the best thing you can do is to invest with a "day 1" mindset. Every day is day 1. PNL back to zero. Regardless if you're up or down YTD.
Useful things going forward:
1/ Post mortems - conduct a quick review on what went wrong and why. Did you call figures wrong or stock reaction - if the latter, did you adequately hedge your idio exposure to isolate fundamentals?
2/ EPS regime - Early in earnings season (say when the money centers print) assess what type of market regime we're in and track this going forward. Macro is always uncertain by definition, but with the pending coin toss of a US election, and Israeli war mongering causing ME unrest w/w, it's safe to say we're in risk off sentiment -> beats lightly rewarded, misses brutally punished.
3/ Follow-throughs - With the above the follow-throughs in the stock moves can be very hard to assess and high idio moves hard to express. As such it could be helpful to utilize a defensive vs offensive playbook. I.e. names you can hide in and preserve capital / alpha (defense) and then switch on to offense when fundamentals and stock picking is rewarded again.
On macro: For as long as I've done this people have always said "this past quarter was especially difficult to call". I don't know why institutional memory is so short, but it's always hard until you have hindsight explaining the moves in the market. Having a process to assess non-fundamentals is as important as fundamentals in this type of market structure with passives, quants, pods driving the majority of the flows.
Sometimes buying post figures isn't a bad thing. In this market regime it's almost easier to call the pre-earnings and post-earnings moves (i.e. how will marginal buyers will interpret surprise) rather than trying to call the surprise itself prior to the release. Even calling beats could mean follow-throughs post earnings is poor due to quick profit taking as people wish to minimize exposure over a heavily skewed macro tape.
What can you do practically?
A/ Sense checks - Try to sense check market regimes by asking "if I had the release prior to the earnings day, would I've been able to call the stock move correctly?". When you notice that the answer is skewing to a 'No', hide in post-earnings names and try to preserve capital for when your strategy is rewarded (missing down days is more important than catching up days - there are multiple studies on this).
B/ Run the numbers - Post earnings season regress earnings day stock moves vs earnings beats. If there's no correlation it's not a fundamental stock pickers market --> we don't play. You can segment this by subsectors and "type of bets" etc.
Anyway, easy to be Hindsight Capital... The important takeaways I have for you is that you always communicate and track your errors (even positive PNL bets that moved for reasons other than your thesis), and that you've managed to identify why things haven't gone your way to your PM / committee / higher ups.
Your process needs to improve, always, regardless of MTD or QTD PNL being up or down.
/My 2c
Excellent writeup stuff like this is why MMs been cooking SMs
and LO which is a mile behind that....I've never seen this kind of thinking at my shop. Really impressive
Thanks brother, really appreciate you taking the time to write that
goat response.
post of the year
Great response.
love it, bank investor?
Yes sir, among others
I always blame my misses on high frequency trading discrepancies. works 50% of the time, other half I blame on China. Works 100% of the time.
Looks like someone is covering the auto industry haha stay strong, my only advice is to look at thw big picture and macro ane zoom out from the EPS.
lol good times, good times.
Of course your PM is pissed. In a year like this where everyone PnL is up, he expects his PnL would be on par as well. You obviously stand in the way of him making money.
Thanks Quant
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