As I wrote earlier, I think you should exercise some caution when buying at this time, and earnings season is proving that that might be advisable. It is infrequent that I buy thinking that it will be a very short term adventure, although I will on occasion take a quick profit. But this is about how to look at a disappointing earnings report.
Now I’m not talking about the RIMM’s of the world. When you are disappointed, and you have to stretch all credulity to come up with a story of salvation….hang it up. Take the little that remains and look for something new. Still I’ve heard noises today about poor expectations for INTC and AMAT. In both cases, it is mostly the expectation of a projection for a slow down in the second half. It is not that their market share is going to fall, but the industry is not projected to do well as a whole. They will still be the world’s largest chip maker, and the world largest maker of equipment to make chips, come next year at this time. They have held those positions for more than the last ten years and I expect it will be hard for anyone to challenge them in the next ten (look at AMD).
If you have the stomach to whether the downturn, buying on a dip or selling puts in this type of situation, can prove to be very profitable. I have this week taken some profits in WTR, because six years ago, I bought in a similar situation.