Here’s a report I wrote for Cannabis Stock Trades, sharing one of Wall Street’s best kept secrets to play Q2 earnings season. Enjoy!
Will Cannabis Stocks Soar Again on Q2 Earnings?
The most important time of the quarter has arrived for cannabis stocks.
Earnings season is when companies reveal sales and earnings results for the previous quarter – and just as important, the company provides guidance on what investors should expect for the following quarter.
Quarterly earnings that beat expectations have a documented history of helping shares outperform the broader stock market in the following weeks and months.
On Wall Street, this pattern is known as the post-earnings announcement drift (PEAD).
Post-earnings announcement drift is the tendency for a stock’s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks (or even several months) following an earnings announcement.
Here are some more details from Wikipedia.
Once a firm’s current earnings become known, the information content should be quickly digested by investors and incorporated into the efficient market price. However, it has long been known that this is not exactly what happens.
For firms that report good news in quarterly earnings, their abnormal security returns tend to drift upwards for at least 60 days following their earnings announcement. Similarly, firms that report bad news in earnings tend to have their abnormal security returns drift downwards for a similar period. This phenomenon is called post-announcement drift.
Take a look at the chart below. Click the link to access full story.
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading. Michael Vodicka owns shares of Canopy Growth Corp (CGC, WEED), Curaleaf Holdings (CURLF), Green Thumb Industries (GTBIF), and Cresco Labs (CRLBF).