To Hold or not to hold through earnings, that is the question. What to do? What to do?
Let’s take, for example, Roku (ROKU:NASDAQ). Roku reported after the bell yesterday. For the sake of simplicity, lets say that you are holding a $5000 gain in the stock at 3:45 PM. Earnings come out at 4:15 PM and you are deciding what to do.
I had a Tax professor in college who reasoned that the answer to every tax question is simply, “It Depends”. While we cant simply avoid giving a straight answer to all questions, the wisdom in that reasoning is legitimate. In many cases, “It Depends”. This scenario is no different as one of three things can happen:
1.) You can hold through earnings and hope for the best but risk all of your gains.
2.) You can sell, take your gains, and move on.
3.) You can sell half and hold the rest. A bad print could wipe out the gains taken but a great print could accentuate the gain.
What you do depends on a lot of things. Are you going to get an ulcer watching the reaction to earnings? Do you need the money? How much have you studied the stock? Have you held the stock long? Taxes come in to play there. What is the overall trend of the market?
#1 above is gambling. #2 is prudent and #3 is sort of on the fence.
Lo and behold, Roku beat on EPS, Revenue and gave good guidance for the future. The stock went from 140 to 157 in the after hours market and is looking to open around $150/per share. The correct trade seems to have been to hold through earnings. If only we had that crystal ball, ay? The correct trade isn’t always the right trade for you. It depends.
Now, if we did do the correct things and hold the stock, do we short it against the strength? That’s or another day. And, even then, it depends.
This article is meant to be for informational purposes. It is written from my personal opinion and from informational sources believed to be accurate. It is not meant to be investment advice, and should not be construed as such. I do not recommend buying or selling any of the stocks discussed. All investments bear risk and your on due diligence should be undertaken to determine which investments are most appropriate for you.