The Profit Column: Moving the Needle on Earnings Season

By TradeSmith Research Team

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It is my great pleasure to welcome you to The Profit Column.

In this brand-new weekly feature, I’ll bring you conversations with the brightest minds around TradeSmith and our extended network about what else… but profits.

I’ll ask our experts about the wins they’ve recently booked for their subscribers, the techniques that led them there… and, of course, how you can get in on the action.

We’ll learn the deep mechanics of short-term options trade wins. We’ll share tales of cashing out on one-in-a-million equity plays. And if we’re lucky, we’ll even get to hear some classic profit stories about how our experts earned their stripes.

And to kick things off, let me introduce you to the focus of this week’s Profit Column — close friend of the TradeSmith family and one of the faces of Derby City Insights, Andy Swan.

This is an exciting time for Andy, his brother Landon, and their readers… because Monday marks the first trading day after the release of the first Earnings Season Pass report of the quarter.

Today, I’m chatting with Andy about his trading advisory, Earnings Season Pass, and why he’s so excited about the next 10 weeks…

The Profit Column: Crushing Earnings Season with Andy Swan

Michael Salvatore, Editor, TradeSmith Daily (MS): Andy, thanks so much for joining me and sharing a bit about your earnings technique.

Andy Swan, Senior Analyst, Derby City Insights (AS): My pleasure Michael. Thank you for having me.

Your timing couldn’t be better — Week 1 kicks off tomorrow and we’ve got some incredible trades lined up for the week ahead.

MS: So, let’s talk about that. I understand your earnings season strategy is quite different from most.

You don’t just watch company fundamentals, or earnings expectations, or anything like that. You’ve found your own edge in an obscure spot — where social media and the stock market intersect.

People post all the time about what products they’re buying, what they’re not, and how they feel about it all. You and Landon built a system to trace all that back to publicly traded companies…

How exactly does that work? Can you really tell how a company’s earnings report will go just from social media signals?

AS: You’d be surprised just how telling a simple post like “I gave in & bought crocs today” can be. When you capture and analyze hundreds of millions of those every single day, there’s a lot you can learn.

It’s so easy to forget the consumer perspective when you trade for a living. Stocks begin to look less like customer-facing businesses and more like a puzzle of numbers that need to match up a certain way.

Those numbers are important, don’t get me wrong. And they feed into our algorithm too. But having a direct line on what everyday folks are saying about the products, services, brands, and companies that touch their lives?

That’s a game-changer for investors. And it’s something Wall Street doesn’t have.

MS: Can you share an example?

AS: Sure thing… How about Coinbase (COIN)?

If you think back to May of this year, it wasn’t exactly an ideal time to get bullish on a cryptocurrency stock. The whole sector was down more than half from the highs. And remember, this was six months after FTX blew up.

A lot of investors took a bath in crypto. They thought the party was over, and the mood was ice cold on Wall Street.

Coinbase, though, was a real bright spot among the stocks we track. The week it was due to report earnings was a huge one: There were nearly 100 companies on that Earnings Season Pass Scorecard. And Coinbase had the strongest Earnings Score signal out of all those: +81. Out of 100, that’s incredibly bullish.

And a lot of that had to do with the uptick in positive sentiment we were getting from Main Street.

I’ll give you a chart to share with your readers…

So this gauge is a measure of how many positive mentions of Coinbase we identified through social media — a metric we call “Consumer Happiness.” A Consumer Happiness level above 70% is a good baseline. Coinbase was there.

But what really tipped us off to Coinbase’s earnings move was that growth you see — Coinbase’s Consumer Happiness had ticked seven points higher on a quarter-over-quarter basis, and 10 points higher year-over-year.

For us, that’s a massive signal.

See, we’ve been using our system to trade earnings for years now. It analyzes something like 500 million data points every single day. Try and imagine the dataset…

MS: It’s tough to even wrap your head around.

AS: But because of all this data, we can tell when one of our metrics is particularly predictive of how a company’s stock price will move on earnings.

For Coinbase, Happiness growth is one of those very reliable indicators.

Consumer trends are another big piece of our puzzle. We track hundreds of them — big-picture things like rising food costs all the way down to seemingly insignificant posts about comfortable work shoes.

For Coinbase, we saw that despite the broad drawdown in crypto, consumer mentions of trading cryptocurrency were trending 27% higher compared to the previous quarter:

MS: To be clear, there’s no way to really see data like this from any other source but your algorithm, correct? It’s not in Coinbase’s financial statements.

AS: Exactly. Coinbase might be tracking this stuff internally, or something like it, but this is our proprietary data. It’s only possible thanks to our AI-powered consumer insights machine.

MS: So, what was the trade you recommended on COIN?

AS: Well, we recommended our readers trade what we call a Very Bullish Spread, which is a type of bull call spread:

It’s a strategy that allows us to take on an appropriate, clearly defined (and limited) amount of risk — without having to go long or short on a stock. Our Earnings Season Pass members know it well. Every single subscriber gets a crash course when they join.

MS: How’d it go?

AS: We nailed this one. It was one of our best of the season. A 217% win in less than five days.

We sent trade instructions in Earnings Season Pass that Monday, May 1. Coinbase reported blowout earnings that few in the financial media seemed to expect — beating on earnings by 76%, a huge surprise, and on revenue by about 18%. And by Friday, our followers were cashing out their profits.

MS: Very impressive. 217%? Most investors wait years for a return like that, riding through all kinds of ups and downs. You churned this out before the weekend… and on a stock most were not expecting to do so well.

I know earnings are kicking off again now, so what do you have in store for this season?

AS: Same as ever — leverage our predictive consumer insights to spot the earnings surprises Wall Street doesn’t even see coming… identify the best way to trade them… and deliver that straight to our Earnings Season Pass subscribers. Or, as I like to say: Get in, get out, get paid. All season long.

Only difference is, this time around, we’ll be operating with an even stronger data set.

Social media is constantly changing, day by day, even minute by minute. Every time one of the millions of active social media users fires off a post, our algorithm gets a new data point to build a compelling trading idea.

We’re also now leveraging the power of AI — that’s something we implemented more recently in 2023. It allows our system to analyze far more data, far more quickly, and with remarkable accuracy.

MS: That’s incredibly exciting. And I understand you have a few big names on deck for this coming week? This will be Week 1 of the new season, right?

AS: That’s right — Week 1. And we’re gearing up for a strong start with Netflix (NFLX) and Tesla (TSLA) on deck, both of which we’ve called big wins on many times over. Actually, we kicked off Week 1 of last season with a 70% win on NFLX.

Another one we’re looking forward to this week is United Airlines (UAL). We’ve got a strong signal on how that one’s going to go. And we’re barely scratching the surface here. Over the next 10 weeks, our followers will have a shot at trading hundreds of these earnings events.

MS: Speaking of, how can TradeSmith Daily readers get in on your recommendations this earnings season?

AS: Well, like I said earlier — your timing couldn’t be better. We’re taking new memberships now, and those that join today will get our Week 1 Scorecard straight to their inbox as soon as it’s released tomorrow evening.

MS: I’ll make sure our readers can have a look at that. [Folks: Go here now. The clock is ticking.] Thanks for taking the time to chat today, Andy.

AS: Anytime, Michael.