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By Jeremy Glaser and Heather Brilliant, CFA | 01-15-2013 12:00 PM

When to Tune Out the Earnings Noise

Unless a company reports quarterly results that stray wildly from expectations, it's best to keep a long-term view on a stock, according to Morningstar's Heather Brilliant.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here with Heather Brilliant. She is our global director of equity research. As we start of fourth-quarter earnings season, we'll look at what investors should keep on their radar screens and what it could mean for their portfolios.

Heather, thanks for talking with me.

Heather Brilliant: Thanks for having me, Jeremy.

Glaser: So, a lot of us are long-term investors. Should we be even focused on short-term earnings--one quarter here, one quarter there? Is it something that's even worth watching?

Brilliant: Well, yes and no. On the one side, there can be I think way too much attention paid to quarterly earnings and people get very excited about and very disappointed at whatever a company reports for the quarter. But at the end of the day, what we're really looking for is what kind of signals there are for the long term within that quarterly earnings report.

So, within a given quarter, you can find some incremental information on occasion that can lead you to feel more confident in your thesis on a stock, or it can lead you to realize perhaps it's time to question the thesis. But other than that, we really try to stay away from the noise of quarterly earnings and focus on the long-term fundamentals of the businesses.

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