Facebook reported second quarter earnings last night that beat analyst estimates, but the shares tumbled as much as 24% on the news in after-hours trading. Why the sell-off? Doesn’t the quarterly earnings crowd reward companies that beat expectations? Not always.
Investing is a counterintuitive art.
So what went wrong for Facebook?
The CNBC video below offers a clue. This was taped before the company reported.
Anything stand out? Note the almost universal agreement from the panel that Facebook is an outstanding stock. The confidence is off the charts.
Lopsided bullish sentiment should always be viewed as a big cautionary flag. You don’t succeed in investing long-term by following the crowd.
For decades, savvy investors have eschewed the sure-thing for the unloved, forlorn, and out of favor.
You can put yourself leaps and bounds ahead of the pack by pursing a similar strategy.
Jeremy Jones, CFA
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