Some of them have been reported to “exceed expectations” while others have not. , NFTs, ETFs, and Twitter, if not FTX and other cryptocurrencies. out.
Acronyms are great, aren’t they? Most people who buy ETFs (Exchange Traded Funds) have no idea what’s in them.
Investors usually don’t know what to do with fractional ownership of paintings or baseball cards (Non-Fungible Tokens) other than bragging rights.
But apart from the madness of those and memetic stocks whose prices are being driven by momentum-chasing groups linked through social media, we need to look at concrete numbers at the end of the day. What determines the “fair value” of a stock.
This analysis is relatively straightforward in the US, as companies are obliged to provide quarterly earnings immediately after the quarter ends.
This report compares earnings from the previous quarter to the same period last year. It also shows the last 12 months (TTM) revenue (last 4 quarters).
All of this and the associated percentage changes are easily washed out with the confusion of other earnings being reported and the fact that they are on different days.
Both Goldman Sachs and Morgan Stanley reported on the same day, which makes for some interesting comparisons.
In previous articles, I have argued that the point is not ‘better than expected’ (sometimes worse) than the actual level of TTM (P/E) used for actual levels, especially price/earnings, where many investors are simply valuing and A multiple to use as a guideline for comparative evaluation.
Banks’ quarter-on-quarter performance was down 60% for Goldman Sachs, down 29% for Citibank, down 21% for Wells Fargo and down 15% for Morgan Stanley. Bank of America was up 5% and JP Morgan was up 14%, surprisingly given the change in circumstances.
This large variability is not uncommon and suggests that it is often related to base effects depending on whether the previous quarter was particularly good or bad.
But it also shows that different banks have different business models, and much of their revenue is related to so-called investment banking or large corporate deals, rather than what most people consider banking. We also pay attention to the fact that
So why not compare the same quarter to the quarter a year ago? This is especially true for companies with pronounced seasonal effects.
The fourth quarter, which includes December, is likely to have fewer trading opportunities. Goldman Sachs is down 69%, Wells Fargo is down 51%, Morgan Stanley is down 39%, and Citibank is down 21%. , JP Morgan and Bank of America rose 14% and 5%, respectively.
Corporate researchers now have to ask if these differences are reproducible. Did they arise because of different business models, or are they more likely to be delayed and vulnerable to pressure from others?
At the TTM level the big picture is a little sharper. They are all down! Goldman Sachs 49%, Wells Fargo 37%, Citibank 31%, Morgan Stanley 24%, JP Morgan 21%, Bank of America 10%.
For the record, Goldman Sachs announced significant layoffs, mostly in corporate activities, while JP Morgan is still hiring.
The point of this analysis is to confirm that profits are declining at the aggregate or index level. This, coupled with rising interest rates, will result in lower P/E ratios and therefore lower index values. This is the most important thing for ETF investors.
— Liston Meintjes is an independent business, economics and market consultant and analyst with many years of experience in the investment industry.