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estimates for companies that lose money. However, the estimates indicate expected losses. These companies can still beat the negative estimates by releasing numbers that show less loss that the estimates. In these cases, their stocks could move up as investors gain confidence in the companies’ ability to manage cash, maintain overall business viability, and their vision to someday become profitable.

For some of you our coverage of earnings may have been overkill. Sorry. But earnings are after all the real reason behind owning or disowning shares in a company. As you can see, there is no clear-cut way to predict what happens to a stock in the short term after the earnings are released. These are only generalities. What can be said is that in the long run, stocks of companies with consistently good earnings will outshine others. Year 2000 proved to be the year of reckoning for many stocks whose companies (many of which were Internet-related) had failed to produce any earnings and whose business models did not hold any promise of future earnings. Investors dumped these stocks with the same zeal that had initially rocketed their values into unjustifiable levels only months earlier.

Ratings — Buy/Sell/Hold

We already discussed analysts issuing quarterly and annual earnings estimates for companies. Many times analysts also issue stock recommendations (or ratings) for these companies as well. Analysts categorize their ratings in different terms, but ultimately the ratings are broken down into Buy, Sell, and Hold. These recommendations are (hopefully) based on the analysts’ views of the future performance of the stocks they rate. If an analyst believes that a company’s future is golden, she may issue a buy rating for it. A hold recommendation may mean that a stock is expected to stagnate or have little upside or downside potential. And a sell rating is based on the view that a …