Staying Agile

It’s reporting season in the U.S. A multitude of companies are announcing their earnings to the market each day. While it might seem like an overload of information, those with a game plan to navigate this time can benefit immensely. As we enter the pointy-end of this reporting season, it’s worth remembering how fruitful this period can be in terms of generating investment opportunities, and the importance of being prepared in order to capture these opportunities.

Reporting season is a very busy time. For starters, this period requires a significant amount of time-sensitive work, with each team member expeditiously processing the earnings reports of companies. Stocks can move dramatically off the back of an earnings announcement, and in very short order. Decisions need to be made rather swiftly, based on the new, and often incomplete, set of information. For the Montaka team, reporting season represents a period where we can leverage the work we have done in the past and capture opportunities.

So how do we approach earnings season? Our priority is to process the earnings results of companies that are in the portfolio, either as longs or shorts. We go through the earnings release, the earnings call, and the 10-K or 10-Q filing. New insights are extracted from these sources and entered into a document that details our investment thesis on that stock. This process is repeated for stocks that are not in the portfolio, but are on our watchlist. These are typically businesses that we monitor closely in anticipation of a better pricing opportunity to either buy or short the stock.

Stocks find their way onto our watchlist if we have performed an analysis on the stock, but concluded that the risk/reward profile of that stock isn’t attractive enough to warrant a position in the portfolio. In other cases, portfolio positions that have since been exited are put on our watchlist, where we set price alerts to await a better price to potentially re-enter the stock.

We keep updated notes on the stocks we’ve looked at in the past and stay on top of ongoing stock developments. While it takes hard work and discipline to manage this in addition to portfolio coverage, it is a necessary part of the Montaka process that enables us to be agile and maximize investment outperformance. While it might sound frustrating to undertake a thorough analysis on a business only to conclude that the price isn’t attractive enough, none of this work is wasted.

By virtue of the fact that we have kept updated models and memos on our watchlist stocks, we are able to make decisions very quickly. For some of these stocks we have stalked them for years, waiting patiently in the background for an opportunity to present itself. If there’s new information or a stock price change that creates a favorable opportunity, we are able to act immediately to capitalize on that opportunity.


George Hadjia is a Research Analyst with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.

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