Beware the 4th quarter...

I have been around some cable TV as of late (not mine), and have been noticing everyone saying that they should be prepared for the sky to fall. While I do think that some pullback is inevitable soon, I don't know if it will be drastic.

What I do suggest you look out for is fourth quarter earnings which in the coming months will be reported for a great deal of business. Despite what you believe about how truthful the first three quarterly reports are, I will tell you that typically the fourth quarter is as legit as it will get. This is due to companies having to report the official earnings to the government. They scrutize themselves thoroughly at this time and you will often find that major adjustments to the other quarters. I've seen GM and Goldman Sach's do this just this past year.

If you are a long term investor, often times you will follow stocks over a longer period. Notice the companies that do and do not have major adjustments after each report. Those that do not swing numbers around wildly likely chance of having both a straight forward business structure and more importantly honest business practices. I can think of a few examples, Trane before it was acquired by Ingersoll-Rand and while it was under American Standard's portfolio was extremely well honest with its practices, and has Baldor over the past 4 years or so (that I have seen).

So be careful and keep a watchful eye on your stocks, the fourth quarter is coming...

No comments: