Q: When I read about the “anticipated” earnings of a company, who is doing that anticipating?

A: Such language typically refers to the consensus of Wall Street analysts, who routinely offer estimates of company earnings before they’re reported each quarter.

Interestingly, though, these analysts are often incorporating guidance from the company itself, such as when management offers thoughts on performance during a conference call reviewing a current earnings report. (In the past, such information was often dispensed privately, to select audiences. That’s no longer allowed, as it created an uneven playing field for investors.)

So don’t pay too much attention to analyst estimates. They may be helpful as you try to determine whether a stock is under- or overvalued, but remember that they’re still just educated guesses. Since a company’s stock can drop if it fails to meet expectations, some companies will lowball their projections, increasing the odds that they’ll beat expectations.

For long-term investors, how a company will perform over the coming years or decades is far more important than what analysts expect will happen in the next three to 12 months.

Q: What’s a “market maker”?

A: When you buy (or sell) shares of stock through your brokerage, the shares usually aren’t transferred directly between you and the seller (or buyer) of those shares. Instead, stocks are typically bought and sold through “market makers,” usually brokerage houses, who keep the market fluid. They profit via “the spread” — the (typically small) difference between the purchase and sale prices in a transaction. They often keep some shares in inventory, too, in case someone wants to buy shares that no one else is offering at the time.



Error of omission

My dumbest investment is one I didn’t make — I didn’t invest in Apple when it was trading for $42 per share. Live and learn.

The Fool responds: That’s the kind of regret that many investors have. Even Warren Buffett has expressed regret about not buying shares of companies such as Amazon or Google long ago. (Note, though, that his amazing investing success reflects how well you can do missing many opportunities, as long as you pounce on some good ones. Much of Buffett’s success also stems from his knowing the limits of his knowledge and not investing in companies and businesses he doesn’t understand well.)

Shares of Apple split 7-for-1 in 2014, and recently traded for around $266 per share. But remember that while you and others who didn’t buy at $42 missed out at that price, you could have bought shares later — at around $50, or $100, or $200 — and still profited.

Buying in early isn’t even enough: Many early investors lose faith or get skittish and sell their shares too soon. There are certainly some investors who bought Apple at $42 only to sell if the shares temporarily dropped a bit, or as soon as they doubled their money.

For best investing results, park your money in the best companies you can find, and aim to hang on for many years, through ups and downs, as long as you retain long-term confidence in their prospects.


Book this

Booking Holdings (Nasdaq: BKNG) has put together a strong combination of online businesses under a single corporate roof. Starting with its Priceline “name your own price” travel site, Booking has made acquisitions such as international hotel specialist Booking.com, online travel aggregator Kayak and restaurant reservation service OpenTable.


Growth at Booking has slowed recently, worrying some observers. But much of the drop in revenue growth is simply due to the effects of the strong U.S. dollar on Booking’s extensive (and growing) international business. China has been a big target for Booking; the company has made substantial investments in businesses such as online travel platform Ctrip.com International (now Trip.com), food delivery app provider Meituan-Dianping and ride-hailing specialist Didi Chuxing.

In its latest quarterly earnings report, the company posted $5 billion in revenue, up 4% over year-ago levels (about 7% on a constant-currency basis), with net income up 10%, to $2 billion. CEO Glenn Fogel noted, “Booking Holdings executed well in our busiest quarter of the year as we booked 223 million room nights, which is up 11% year-over-year.”

Booking’s extensive international presence makes it — and its shareholders — likely to reap rewards as more people around the world discover and are able to afford the joys of travel. (The Motley Fool owns shares of and has recommended Booking Holdings.)