Material event search

Find companies whose material event filings reveal investment losses before their quarterly report does. When markets fall sharply, some companies, especially those holding large portfolios of marketable securities, take significant non-operating losses: the earnings report may look fine on the surface while hidden investment losses wipe out operating profits. This suits investors who want an early warning, or an event-driven edge, on small and mid caps.

Strategy logic

1. Find the filings: companies disclose material events in filings (SEC Form 8-K in the US; many markets have equivalent announcement systems). These filings often reveal losses from disposing of securities before the quarterly earnings report is published.
2. Flag the companies: keep those whose filings show significant non-operating gains or losses.
3. Compare with the results: check the flagged companies against their quarterly results.
4. Position before the report: avoid or buy the flagged companies before the quarterly earnings report confirms what the filing already revealed.

Code

from finlab import data

def search_announcements(info, title_keyword, content_keyword, since='2022-04'):
    """Announcements after `since` whose title and content contain the keywords."""
    return info[
        (info.index > since)
        & info['title'].str.contains(title_keyword)
        & info['info'].str.contains(content_keyword)
    ]

info = data.get('important_info_announcement')  # Taiwan market only

The analytical approach, screening for non-operating losses before earnings, is the same in every market.

How to adjust it

• title_keyword and content_keyword: what the title and the announcement text must contain.
• since='2022-04': only announcements after this date are searched.
• What to look for: companies with weak core businesses that dabble in short-term securities trading can suffer outsized losses in downturns. Red flags include:
  • securities investments as a high share of equity, which amplifies portfolio losses relative to company size;
  • frequent disposal announcements, a sign of active and potentially risky trading;
  • tourism, hospitality and other cyclically weak sectors, where companies in struggling industries may chase investment returns to make up for poor operating performance.
• Which direction to trade: market participants often overlook material event filings for small and mid caps, and that information gap creates opportunities in both directions:
  • avoiding blow-ups: screen out companies with recent disposal losses before earnings season;
  • catching hidden gains: some filings reveal gains from asset disposals that are not yet reflected in the stock price.

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