If you’re one of those relics who relishes ducktail hairdos and buy-and-hold investing, close your eyes.

No, silly, not so the Brylcreem doesn’t run into them.

It’s worse.

It’s earnings season. Time for the Warren Buffett clones to hide under the covers. You too, Warren Buffett!

It’s better that you’re not an eyewitness to this carnage. We’re talking about the sorry sight of seeing your dollars shrink as stocks sell off on earnings news – good, bad or ugly earnings news.

This is the worst of times to be holding stocks, when companies issue quarterly results.

And it’s particularly dangerous to hold major positions in companies as they release earnings in an overheated market that even insiders, who don’t subscribe to buy-and-hold either, have been selling at alarming rates in recent weeks.

Even companies that have been beating the Street’s estimates are getting Bryl-creamed on earnings releases because the market usually anticipates the news, resulting in pre-earnings runups.

Some of the early returns on third-quarter results are already in and the bloodletting has begun in earnest:

* EBay (EBAY-Nasdaq) reported 70-per-cent revenue growth from a year ago, yet the shares still tanked by five per cent on the first day after news. The company also lowered 2004 expectations.

* Apple Computer (AAPL-Nasdaq) beat the Street’s estimates by a nickel with earnings of 12 cents per share, yet the stock immediately gapped down eight per cent as it resumed trading after the news, meaning you took an instant eight-per-cent haircut if you tried to sell after the news.

* Harley-Davidson (HDI-NYSE) earned 62 cents per share to beat the Street by six cents, yet the shares took an immediate four-per-cent hit.

* IBM (IBM-NYSE) met estimates of 52 cents per share, but the stock tumbled almost five per cent.

* Rogers Wireless Communications (RCI.A-TSX) slashed its losses by $82.4 million from year-ago results, yet the stock was off three per cent on the news.

* Falconbridge (FL-TSX) improved its earnings in one year from a loss of 10 cents per share to a profit of 11 cents per share, yet shares dove three per cent. Stay tuned. This may be just the tip of the iceberg.

Amazingly, most market players still don’t get it.

If they did, the trading patterns on earnings releases wouldn’t be so predictable.

It’s a fact that stocks, particularly high-profile, high-volume plays, drop like stones on earnings releases, or even the day before, although there are rare exceptions where major surprises can extend the gains.

So it ought to be a no-brainer that, if you’re trading the market, the odds are stacked against those who hold companies when they release earnings. It’s imperative that you find out when the earnings will be released.

Yet, judging by the predictable trading pattern of stocks on earnings news, most investors don’t know or don’t give a damn.

Or perhaps you’ve been brainwashed into believing that the old buy-and-hold mantra still works in this wild roller-coaster stock market.

In that case, with earnings season in full tilt, you’re probably better off leaving the blinders on.

* STREET TALK: When Vancouver portfolio manager Wayne Deans speaks, people ought to pay attention. Deans, of Deans Knight Capital Management, is one of Canada’s hottest money managers. The funds he manages, the Northwest Specialty Equity Fund and the TDK Resource Fund, both boast returns of almost 50 per cent over the past year.

In the past two years, Deans has been a regular contributor to the Edge’s Pro’s 3 Stars stock-picking column. His ‘stars’ are up a stunning 79 per cent.

Two years ago, Deans picked an obscure little DVD manufacturer named Cinram International (CRW-TSX) at $4.20. Since then, Cinram has gained 542.9 per cent to $27.

So what is Deans saying about the market today?

“Expensive, expensive, expensive,” he warns.

For Deans’ latest stars, see this week's Pro's 3 Stars column.

Next week, we’ll take stock of the past year’s results of the Pro’s 3 Stars and crown the Stock Guru of the Year.

* SAGE WORDS: “The problem with the world is that everyone is a few drinks behind.”

– Humphrey Bogart




HOT STOCK: SILENT WITNESS ENTERPRISES
SWE-TSX $11.14
Up $3.89 (+53.9%) on 1,556,900 shares (for week ending Oct. 17).
Honeywell (HON-NYSE) found some loose change, probably in an ashtray, so they bid $87 million Cdn for the Surrey video monitoring technology company. It may not have registered on Honeywell’s own Richter scale but this was a big deal to Silent Witness shareholders. Extreme CCTV (EXC-TSX) shareholders weren’t complaining either, as stock in B.C.’s other hot security technology outfit leaped 39 per cent on takeover speculation.



COLD STOCK: SMTC MANUFACTURING
SMX-TSX $1.25
Down 88 cents (-41.3%) on 242,100 shares (for week ending Oct. 17).
First, SMTC gave the good news. The Toronto electronics manufacturer had hired turnaround artist John Caldwell, ex-CEO of Geac Computer, as CEO. Then came the bad news. The company warned its stock would be significantly diluted as it undergoes debt restructuring. Seems shareholders read the news release while standing on their heads.