Earnings season is upon us again and oh am I ever so excited. The S&P has finally begun to correct itself and there are a whirl of headwinds that could make things interesting. With the excitement of earnings season also comes the potential disappointment of failures to meet EPS and revenue projections. This sometimes is a reason to re-evaluate a position but most of the time is simply a small snapshot into a company's performance that has little to do with overall long-term trends. This is a time not to panic on short-term drops in share price, but instead is a great time to pick up some bargains on stocks that are unfairly punished.

Then what should you do to be ready for the ever so finicky market that may not see the earnings through the rose-colored glasses of a contrarian investors?

Here are my 5 tips:

1. Have money ready to go...
   There should definitely be money in your account to make a couple of purchases. Yes that means enough to add more than one new FULL position. 
2. Have a specific watchlist...
   This is important to keep your focus. There can be a lot of movement during the earnings season and there are a lot of temptations. That being said, you don't want to blow your money on a position in a decent company early when there may be a blue chip bargain coming.
3.  Read the Earnings Reports...
   These are free and can be found on every company's investor relations section. This is a must if you are getting ready to enter a new position for the long-term. What do you look for? The reason why an EPS/revenue miss happened, why the market is reacting the way it is, and also what the future projections look like. These are imperative to make an educated decision on a new position.
4. Listen to the Conference Calls...
   These are also free and can really give you insight into just what the company believes about its future. *BONUS*- Pay attention to the questions by fund managers in the Q&A time. These may open up your eyes to problems/potential that you didn't even think of yet!
5. Buy in 1/2 positions...
   I know I said to have enough for two FULL positions, and I still stick with that requirement. That doesn't mean though that you need to buy it all at one time. I like to buy 1/2 a position, then wait a week or more, and finish off the other half. This allows me to get a little bit better look on whether the market will continue to drop the company or whether it truly was a small overreaction.

No matter what earnings will always surprise someone and those that are looking to buy (or sell short) should be ready to pounce. Since there is always a loser on either side of a transaction you should be well aware of what you are purchasing and make sure that you have done your research. There is no better way to do this then to go into an earnings report knowing a company already and simply making new observations based on the recent information. If you go in blind and try to make a decision in haste, then you will surely make a mistake. If not on the first purchase then in the near future...

Although these tips are not anything new to most of you I hope that it can at least give some guidance or basic knowledge to those in need.

As always feel free to leave any comments below.