1/ How to review quarterly earnings 🧵

A step by step guide using $DXCM as an example

⬇️

2/ The BIG question: Is the thesis on track❓

Other question:

❓Is revenue growing?
❓Are margins stable/expanding?
❓Profits?
❓Balance sheet?
❓New opportunities?
❓New threats?

3/ I open 4 browser tabs

Tab 1 - Current company earnings report / shareholder letter

Tab 2 - Previous company earnings report / shareholder letter (check guidance)

Tab 3 - Analyst estimates

Tab 4 - Call Transcript

4/ Tabs 1 & 2 - Find the current & previous earnings report

I search "Dexcom Investor Relations"

I click on "press release"

Open the newest quarterly earnings report and last quarter

It can also be a shareholder letter/presentation

5/ Tab 3 - Find the quarterly analyst estimates

Open up $DXCM in yahoo finance

The "news" section usually has a link to reports on whether the company beat/met estimates

The "analysis" tab is a good source, but sometimes it updates to the next quarter too quickly

1/

Get a cup of coffee.

In this thread, I'll walk you through the importance of understanding *correlations* between bets.

For example, a portfolio of *correlated* stocks can have very different performance characteristics compared to a portfolio of *uncorrelated* stocks.

2/

Imagine we put $100K into a stock.

In the next 1 year, the stock could go down 30% (our worst case scenario).

Or it could go up 50% (our best case scenario).

Or it could give us a return somewhere between these extremes.

Say all such returns are equally likely.

3/

A "probability density diagram" can be used to visualize such scenarios.

On the X axis, we take all possible outcomes (in this case, -30% to +50%).

And on the Y axis, we plot the likelihoods of these outcomes.

Like so:

4/

Take any 2 outcomes on the X axis -- say, R1 and R2.

Now, calculate the area under the probability density diagram between R1 and R2.

Our probability of getting a return *between* R1 and R2 is exactly this area.

Like so:

5/

This is called a "uniform" distribution -- *all* returns between -30% and +50% are *equally* likely.

But we can also imagine other "non-uniform" scenarios, where *some* returns are more likely than others.

Here too, probability density diagrams can help us.

A few examples:

Stocks from Reddit today. 💸💸

So last few days was a push for Weed Stock but now it is semi conductor stocks. Keep an eye out for the cheaper semi-conductor manufacturers. ⚡⚡

Here are the stocks we are tracking rn 👇🏼👇🏼

#PoolsApp #stocks #investing #trading #investors

$TNXP is a real BIO med value play in a sea of PnD’s.
Phase 3 trials, Institutional Backing

$SNGX breakout through major

$ASRT: Lawsuit win, sold shares, new

$CBBT declaring

1/ It's time to have a conversation about #Dogecoin.

If you're invested in $DOGE after @elonmusk's much endorsement (such wow), there are a couple of things that you should probably know👇

2/ First, let's talk about network security (I'll try to keep it simple).

Unlike BTC, ETH, or really any other major network, Dogecoin does not have its own miners -- it currently relies on another network, Litecoin, to survive.

So how did this happen and what does it mean?

3/ Back in 2014, Dogecoin was at a tough spot. There weren't enough miners working on $DOGE and there was a real risk that its network would be attacked.

A network attack (like a "51% attack") would likely destroy Dogecoin, so its developers had to do something...

4/ Their solution was to adopt something called Auxiliary Proof of Work (AuxPoW); a way to merge Dogecoin mining with other similar networks.

Put simply, AuxPoW enables miners to work on multiple coins at the same time and reuse the same work.

5/ Back then, it was somewhat of a controversial solution. Some users were concerned that AuxPoW would put the future of $DOGE at the mercy of bigger miners.

While the change likely saved Dogecoin, the concern was valid: ~95% of Dogecoin mining today is done by Litecoin miners.

Carson Block of @muddywatersre writing in the FT lays the blame of stonk gyrations like GameStop (sub $20 on 12 Jan, up 18-fold in 10 trading days) squarely on low rates and passive investing.

This is Hogwash, Blatherskite, Buncombe, and

Pure Trumpery.

It was 1 stock out of tens of thousands in the world which moved that way and has become a meme unto itself of fantabulous stock and social movement.

Carson talks briefly about low rates and government bailouts, which theoretically should affect the others.

But then he falls into the trap that many others who do not understand passive investing do.

This is NOT how passive investing works.

To be clear: if a passive fund owns $1bn of stock of an index which has a Sum (Stock Float Shares x Price) of $1trn, that fund will own 1/1000 of the float shares of each stock.

If the price of 1 stock rises 23-fold in 11 days, passive investors will do...

exactly nothing.

If the rise in that 1 stock leads to the index float market cap moving to $1.02trln, then if the fund receives an extra $100mm, it will go buy exactly $100mm/1.02trln of the float of each stock in the index (i.e. just under 1bp - of EACH stock - Apple, AMZN, and GME).

Do you know what separates professional traders from losing traders?

Here's my answer and it's not what you think...

#1: Think independently

If you want to succeed in trading, you must have the ability to think independently.

Instead of asking “what” or “when”, learn to ask:

Why.

By asking why questions, you’ll come up with a hypothesis to your questions which brings me to...

#2: Willing to get your hands dirty

Just because you came up with a hypothesis, doesn’t mean it’s correct.

That’s why as a professional trader, you must validate your trading ideas.

You must get your hands dirty and do the work like backtesting and forward testing.

#3: Have the right expectations

Most new traders enter trading with the wrong expectations and end up quitting trading altogether.

The truth is…

* You won’t make money every day

* It’s not a get-rich-quick scheme

* Learning curve is steep

#4: Manage risk like a pro

No strategy works all the time, that’s why you manage risk all the time!

You can use stop-loss, options, position-sizing, etc.

A losing trade must be managed so it feels like an ant bite—not a shark bite where you lose a chunk of capital.

Good Saturday Morning Chart Fans!

Will I have to learn to draw vertical lines with no slope? Let's have a look!

DJIA Channel Check

Transports. Same pattern as we saw in the fall.

Utes.

SPX Channel Check

Friday Alpha!

Let's Talk $LRC

1/ #ETH fees are painful these days. Anyone who interacts with #DeFi has tears in their eyes when approving a transaction.

2/ Thankfully there are projects like @loopringorg that build the 2nd layer atop of which we can trade our magical tokens in a decentralized manner.