It’s every stock market investor’s dream to find the next monster success story like Nvidia (NASDAQ: NVDA). Its share price is up by an otherworldly 27,850% in 10 years, turning every £3,600 invested into a cool £1m over that period (excluding currency moves).
Of course, Nvidia is special and the speed and scale at which the artificial intelligence (AI) revolution took off has caught everyone by surprise. Or has it? Perhaps not for some savvy shareholders who were following what CEO Jensen Huang was saying before the AI boom took hold.
But besides being a fly on the wall in the AI chipmaker’s boardroom, how could everyday investors have followed Nvidia’s plans? Well, most companies host earnings calls with analysts to discuss the most recent quarter (or half for many UK companies). Crucially, management often discusses what it expects to happen in future.
The transcripts of many of these Q&A conference calls can be found in several places online, including The Motley Fool. The app I use is Quartr, which contains live earnings calls, transcripts, presentations, conferences, and analyst forecasts — all for free!
Here’s how an investor could use these communications to spot potential timely buying opportunities.
Looking back
As strange as it might seem now, Nvidia hasn’t always blown away Wall Street expectations every single quarter.
For example, if we time-travel back to the third quarter of fiscal 2023 (late 2022), the firm’s revenue dropped 17% year on year. It was suffering from weak chip demand and restrictions on exports to China. Both remain potential risks today.
But within that weakness, data centre revenue still surged 31%. And during the call, management repeatedly stressed how generative AI was really taking off.
CFO Colette Kress said: “Earlier today, we announced a multiyear collaboration with Microsoft to build an advanced cloud-based AI supercomputer to help enterprises train, deploy and scale AI including large state-of-the-art models.”
Later, she added: “Despite near-term challenges, we believe our long-term opportunity remains intact, fuelled by AI…we’re seeing surging demand in some very important sectors of AI and important breakthroughs in AI.
CEO Jensen Huang later reiterated this: “We’re seeing…surging demand for AI.”
For tuned-in investors willing to look past the weak quarter, there were huge gains on offer. The stock is up 855% since that earnings call in 2022!
Looking forward
Recently, one comment in the earnings call of a company I follow — Latin American digital bank Nu Holdings (NYSE: NU) — made my ears prick up.
Mexico is an opportunity that net-net, I think, could be another Brazil for us.
David Valez, founder and CEO of Nu Holdings, Q3 2024.
Nubank, as it’s known, has 100m customers in Brazil, an incredible 57% of the adult population. But only 10m customers today in Mexico (around 12% of the adult population). Interesting.
As a lender, this neobank is inherently exposed to economic volatility and rising defaults. But if Mexico becomes another Brazil for the company, the growth opportunity is immense. I plan to buy more shares.
Foolish takeaway
Reading a company’s earnings call transcripts can help an investor make more informed decisions on when to buy a stock, and vice versa.
In my experience, they often contain insights and breadcrumbs. Following these opportunities can be very lucrative.
