---
title: "Stock Investing 2026: Assessing Earnings and Liquidity"
locale: en
category: report
category_name: "Report"
translation_status: reviewed
license: cc_by
author: "Injoys Editorial Team"
source_url: https://injoys.com/en/articles/stock-investing-2026-earnings-liquidity-guide
published_at: 2026-11-04T13:54:57+09:00
---

# Stock Investing 2026: Assessing Earnings and Liquidity

> Semiconductor earnings growth is confirmed, but whether current share prices are undervalued must be checked separately. When deciding portfolio allocations, distinguish the meanings of M2, TGA and reverse repos from the conditions under which each sector generates profits.

## Key Points

- The 755% increase in Samsung Electronics' operating profit for the first quarter of 2026 comes from its preliminary earnings announcement.
- Forward P/E uses estimated earnings per share, so it must not be calculated using operating profit forecasts instead.
- M2 growth and a decline in reverse repo balances alone cannot tell you how much money is flowing into the stock market.
- For semiconductors, renewable energy and telecommunications infrastructure, each company's orders and the conditions for turning them into profits must be checked separately.
- Cash allocations should be based on when you need the funds and how much loss you can tolerate.

Stock investment opportunities should be judged by earnings prospects and purchase prices, not the intensity of fear. Semiconductor earnings growth has been confirmed. But an increase in liquidity alone does not guarantee rising stock prices. Set your investment allocation based on when you will need the money.

Corporate earnings figures are based on company announcements made on April 7 and October 28~29, 2026.

## Facts Confirmed by Semiconductor Earnings

Samsung Electronics' reported operating profit growth of 755% is an actual announced figure. However, it refers to preliminary results for the first quarter of 2026. It should not be interpreted as an annual growth rate or as the upside potential of the current share price. [Samsung Electronics' First-Quarter Preliminary Results Announcement](https://news.samsungsemiconductor.com/kr/삼성전자-2026년-1분기-잠정실적-발표/)

If you are making a decision in November 2026, you should also check the third-quarter announcements. Samsung Electronics cited expanded HBM4 sales as a driver of its results. SK hynix also reported increased sales of high-value server products. The two companies' announcements show that AI-related demand translated into earnings. [Samsung Electronics' Third-Quarter Results Announcement](https://news.samsung.com/kr/삼성전자-2026년-3분기-실적-발표), [SK hynix's Third-Quarter Results Announcement](https://news.skhynix.com/en/q3-2026-business-results/)

| Company and reporting period | Consolidated revenue | Consolidated operating profit | Announcement date and type |
|---|---:|---:|---|
| Samsung Electronics, first quarter of 2026 | KRW 133 trillion | KRW 57.2 trillion | April 7, 2026, preliminary results |
| Samsung Electronics, third quarter of 2026 | KRW 195.3 trillion | KRW 107.4 trillion | October 29, 2026, results announcement |
| SK hynix, third quarter of 2026 | KRW 104.6155 trillion | KRW 83.3338 trillion | October 28, 2026, results announcement |

SK hynix stated that its accounting review was not complete at the time of the announcement. When reading subsequent reports, check whether the figures have been revised. Figures announced by a company should be distinguished from financial statements whose audit or review has been completed.

Earnings growth alone cannot tell you how long a boom will last. You also need to examine the expectations already reflected in the current share price. An investment decision requires assessing whether future sales volumes and prices can be sustained.

## Criteria for Judging Undervaluation Using Forward P/E

Forward P/E is the current share price divided by expected earnings per share. Earnings per share is the net income attributable to one share of stock. Operating profit cannot be used directly as the denominator in a P/E ratio. [CFA Institute's Explanation of Price Multiples](https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/market-based-valuation-price-enterprise-value-multiples?trk=article-ssr-frontend-pulse_little-text-block)

- Trailing P/E: A measure that uses earnings per share from recent results
- Forward P/E: A measure that uses expected future earnings per share
- 12-month forward P/E: A measure that uses expected earnings per share for the next 12 months
- Fiscal-year forward P/E: A measure that uses expected earnings per share for a specific fiscal year

A forecast of KRW 300 trillion in annual operating profit alone is not enough to calculate a P/E of 4. First, identify which company the forecast concerns. Then check its expected net income and number of shares. The date of the share price is also needed for the calculation.

The claim that the S&P 500 trades at less than 20 times earnings also needs a reference date. The claim that the KOSPI trades at 8~9 times earnings likewise requires checking the source of the calculation. These figures have not been verified as current market values in this article. Check the period covered by the earnings forecast in your brokerage's explanation of the metric.

| Comparison item | Basis that must match | Problem if the basis differs |
|---|---|---|
| Share prices and indexes | Same trading day | Mistaking price changes for differences in value |
| Expected earnings | Same forecast period | Mixing this year's earnings with earnings for the next 12 months |
| Definition of earnings | Same accounting and adjustment basis | Differences in whether one-time gains and losses are included |
| Companies being compared | Similar business structures | Mistaking industry differences for undervaluation |
| Forecast data | Same preparation date | Assessing current prices using outdated forecasts |

A low P/E may reflect expectations of declining earnings. Companies that are highly sensitive to economic conditions can have low P/E ratios during a boom. You therefore need to assess whether current earnings can be sustained under normal conditions. CFA Institute explains the use of normalized earnings per share in this type of analysis.

## Differences Between M2, TGA, and Reverse Repos

These three indicators cover different pools of money. M2 is a monetary measure that includes cash and deposits. TGA is the U.S. government's general account at the Federal Reserve. Reverse repos refer to short-term transactions that financial institutions and others conduct with the Federal Reserve.

The components of M2 in South Korea and the United States are not identical. The Bank of Korea and the Federal Reserve provide definitions in their respective statistics. When comparing countries, also use the same basis for growth rates. [Bank of Korea's Explanation of M2](https://snapshot.bok.or.kr/search/M2), [Federal Reserve H.6 Money Stock Statistics](https://www.federalreserve.gov/RELEASES/h6/current/default.htm)

| Indicator | What it represents | What to check when making investment decisions |
|---|---|---|
| M2 | Money supply, including cash and deposits | Reference month, growth rate, and whether figures are seasonally adjusted |
| TGA | The U.S. government's deposit balance at the Federal Reserve | Tax receipts, Treasury issuance, and government spending |
| ON RRP | Amount placed in the Federal Reserve's overnight reverse repo facility | Short-term interest rates and yields on other short-term instruments |
| Bank reserves | Deposits that banks hold at the Federal Reserve | Changes occurring alongside movements in TGA and reverse repos |

### Does an Increase in M2 Mean Money Is Entering the Stock Market?

An increase in M2 does not directly show the amount of stock purchases. That is because an increase in deposits can be included in money supply growth. The absolute size of the money supply should be distinguished from money flowing into the stock market. M2 growth alone also cannot tell you when stock prices will rebound.

M2 statistics are released monthly. Describing M2 as setting new highs every day therefore does not match its release frequency. To determine whether it is at a record high, compare it with historical values from the same series.

### Is a Large TGA Balance Favorable for Rising Stock Prices?

The TGA balance alone cannot determine the direction of the stock market. Government spending can increase bank reserves, all else being equal. Conversely, tax payments and Treasury issuance can reduce reserves. The Federal Reserve Bank of St. Louis explains these relationships between accounts. [Explanation of the Federal Reserve's Balance Sheet and Reserves](https://www.stlouisfed.org/publications/page-one-economics/2026/feb/fed-balance-sheet-and-ample-reserves)

Money in the TGA is used for government spending and cash management. There is no basis for classifying that balance as money waiting to buy stocks. Where the money goes after it is spent must also be checked separately.

### Does a Decline in Reverse Repos Mean Tightening Has Ended?

A decline in reverse repo usage alone does not establish that tightening has ended. The Federal Reserve describes ON RRP as a supplementary tool for managing short-term interest rates. These transactions change the composition of the Federal Reserve's liabilities. They do not directly change the size of its securities holdings. [Federal Reserve's Explanation of ON RRP](https://www.federalreserve.gov/monetarypolicy/overnight-reverse-repurchase-agreements.htm)

Money leaving reverse repos can move into Treasury bills and other instruments. The Federal Reserve's 2025 analysis also confirmed such shifts. The entire decline in the balance should therefore not be counted as money flowing into the stock market. [Federal Reserve Analysis of MMF Asset Allocation](https://www.federalreserve.gov/econres/notes/feds-notes/insights-from-mmf-portfolio-allocations-amid-balance-sheet-normalization-20250303.html)

## Comparing Semiconductors, Renewable Energy, and Telecommunications Infrastructure

To assess whether a company benefits from increased AI investment, check whether that investment translates into revenue for the company. Even companies in the same industry have different customers and contract structures. The table below provides criteria for review, not a ranking of stocks to buy.

| Sector | Conditions for expectations to translate into revenue | Information to check | Conditions that weaken expectations |
|---|---|---|---|
| Semiconductors | Customer adoption and increased shipments | Revenue by product, production plans, and customer demand | Falling selling prices, increased supply, and reduced customer investment |
| Wind and solar power | Orders and deliveries for power generation projects | Order backlog, contract terms, and profitability by project | Permitting delays, rising financing costs, and contract changes |
| Power infrastructure | Grid connections and equipment installation | Delivery schedules, orders, and capacity expansion plans | Grid connection delays and project cancellations |
| Data center networking equipment | Actual adoption of the relevant equipment | Product uses, customer mix, and order details | Adoption of other technologies and delayed customer investment |
| Telecommunications services and mobile network equipment | Investment and demand from the relevant operators | Results by business and capital expenditure plans | Reduced investment and increased competition |

The IEA recorded 17% growth in global data center electricity demand in 2025. The figure appears in its 2026 report. It supports the case for expanding electricity demand. It does not represent the earnings growth rate of any individual renewable energy company. [IEA's Key Questions on Energy and AI](https://www.iea.org/reports/key-questions-on-energy-and-ai/executive-summary)

Supplying electricity requires grids and storage systems as well as generation facilities. The IEA identifies grid connection delays as a constraint. When reviewing a renewable energy company, check which projects it supplies. Distinguish contracts linked to data center demand from those that are not.

Telecommunications infrastructure also needs to be separated by business area. Data center networking equipment and mobile network equipment serve different sources of demand. Samsung Electronics reported a decline in its networks business results for the third quarter of 2026. This shows why a semiconductor boom cannot be assumed to extend to every telecommunications business.

## Hidden AI Investment Concentration Risk Across Different Industries

Holdings spread across different industries can still depend on the same demand. Holding both semiconductor and power equipment companies is one example. If telecommunications equipment holdings also depend on AI data center investment, concentration increases. This risk follows from the industry connections described above.

In this situation, check shared customers and funding flows rather than the number of stocks held. Reduced investment by a major customer can affect several companies in your portfolio. Do not assume you are diversified simply because the stocks have different names.

- Customer concentration: Whether the companies depend on the same major customer's investment budget
- Demand concentration: Whether they are linked to the same demand for data center construction
- Financing-condition concentration: Whether rising interest rates affect funding for multiple businesses
- Schedule concentration: Whether grid connection delays postpone deliveries by several companies at once

The SEC describes diversification as spreading risk across different investments. Asset allocation alone does not complete diversification. You also need to examine the composition of your actual holdings. [SEC Guide to Asset Allocation and Diversification](https://www.sec.gov/investor/pubs/assetallocation.htm)

## Cash Allocation by Investment Circumstances

An allocation of 60~70% to stocks and 30~40% to cash is not a universal answer. Your cash allocation should match your investment goals. The SEC also explains that no single allocation fits every goal.

| Circumstances of the funds | What to check first | Criteria to reflect in the allocation |
|---|---|---|
| Money needed in the near future | Spending dates and required amounts | Preservation of principal and ability to withdraw on the required date |
| Irregular income | Possibility of a shortfall in living expenses | Separation of investment funds from reserves for living expenses |
| Money you do not plan to use for a long time | Tolerance for losses | An investment allocation that allows you to withstand volatility |
| Concentration in AI-related stocks | Shared customers and demand | Total amount exposed to the same risk |
| Repeated changes to the plan because of losses | Losses you can actually tolerate | Adjusting risk to a level you can maintain |

Cash is a way to meet planned expenses. It can also provide funds for additional purchases. However, holding cash does not itself guarantee investment returns. Changes in purchasing power due to inflation also need to be considered.

Buying in stages spreads purchases over time. If a company's value deteriorates, losses can occur even when purchases were spread out. Before buying more, check whether your original investment rationale still holds.

## Common Mistakes When Treating Falling Stock Prices as an Opportunity

A price decline and undervaluation are different assessments. Undervaluation means judging that a price is low relative to expected earnings. If earnings expectations have also fallen, a price decline alone does not make the investment more attractive.

| Common interpretation | Missing consideration |
|---|---|
| Strong results mean the share price should rise | Expectations already reflected in the current price |
| A low P/E means the investment is safe | Potential earnings declines and forecast revisions |
| Geopolitical events are temporary noise | Effects on costs, logistics, and customer demand |
| Having cash means you can buy every dip | Separation of cash for living expenses from cash for investment |
| High-quality companies simply need to be held for a long time | Purchase price and changes in the business |

Geopolitical events can change a company's costs and operating environment. Samsung Electronics' earnings conference materials also note the uncertainty of forward-looking statements. Factors include changes in exchange rates and interest rates. The materials warn that future results may differ substantially from forward-looking statements. [Cautionary Notes for Samsung Electronics' First-Quarter 2026 Earnings Conference](https://images.samsung.com/kdp/ir/events/2026/2026_1Q_conference_kor.pdf)

## What to Check Before Buying, in Order

Starting with how the money will be used makes it easier to maintain consistent criteria for buying decisions. Apply market forecasts after that. The sequence below is intended to help you decide how to respond if your forecasts turn out to be wrong.

1. Write down when you will need the investment funds. Separate the money needed for planned expenses.
2. Check the reporting period covered by the earnings data. Also mark whether the figures are preliminary.
3. Record the source and preparation date of the earnings forecast. Distinguish operating profit from net income.
4. Reassess the investment's appeal at the current price. Use comparisons based on the same criteria.
5. Check the risks shared by your holdings. Calculate the total amount invested in assets linked to AI investment.
6. Write down the conditions for buying more and reducing your allocation. Also decide how to respond if corporate earnings change.

## FAQ

### Is it true that Samsung Electronics' operating profit increased by 755%?
Samsung Electronics announced preliminary results on April 7, 2026. The year-over-year increase in consolidated operating profit for the first quarter was 755%. This figure does not refer to full-year growth.

### Will stock prices rise if semiconductor earnings improve?
Earnings growth alone cannot guarantee a rise in stock prices. You need to check what expectations are already priced in. Compare future earnings prospects with the purchase price.

### Can I calculate PER using operating profit?
PER is a metric calculated by dividing the stock price by earnings per share. Operating profit is different from earnings per share. You should not calculate forward PER using only operating profit forecasts.

### Can I directly compare the forward PER of the KOSPI and the S&P 500?
First, check whether they use the same reference date and forecast period. The sectors that make up the indices also differ. A lower multiple alone is not enough to conclude that one market is more undervalued.

### Does an increase in M2 mean an increase in funds for stock purchases?
M2 is a measure of the money supply that includes cash, deposits, and other forms of money. It does not directly measure the amount spent on stock purchases. You need to distinguish between M2 growth and inflows into the stock market.

### Can I expect stock prices to rise if the U.S. TGA balance is high?
The TGA is the U.S. government's general account at the Federal Reserve. It is affected not only by spending but also by tax revenue and Treasury issuance. The balance alone cannot tell you how much money will flow into the stock market.

### Does money move into the stock market when reverse repo balances decline?
Money leaving reverse repos can move into Treasury bills or private repos. Federal Reserve analysis has also confirmed these movements. You cannot treat the entire decline in balances as funds for stock purchases.

### Does an increase in AI data centers guarantee profits for renewable energy companies?
Growth in electricity demand and profit growth at individual companies are separate matters. You need to check actual supply contracts and business profitability. Delays in grid connections also need to be reviewed.

### Am I diversifying if I buy both semiconductor and power equipment stocks?
Both sectors may depend on the same demand from AI investment. A reduction in investment by shared customers could affect both. Check the extent of shared risks rather than the number of stocks.

### Is an allocation of 60~70% stocks and 30~40% cash appropriate?
There is no single allocation that suits every investor. The criteria are when you need to use the money and how much loss you can tolerate. Keep money needed for living expenses separate from investment funds.

### Can I avoid losses by buying in installments during a market downturn?
Buying in installments means spreading purchases over time. It does not prevent losses caused by a decline in a company's value. Before buying more, check whether your investment rationale still holds.

### What should I check first when market fear increases?
First, check when you will need to use your invested funds. Then look at whether the company's earnings outlook has changed. You can distinguish emotional reactions from changes in earnings when making your judgment.

## Sources

- [Samsung Electronics Announces Preliminary Earnings for 1Q 2026, April 7, 2026](https://news.samsungsemiconductor.com/kr/삼성전자-2026년-1분기-잠정실적-발표/)
- [Samsung Electronics Announces 3Q 2026 Financial Results, October 29, 2026](https://news.samsung.com/kr/삼성전자-2026년-3분기-실적-발표)
- [SK hynix Announces 3Q26 Financial Results, October 28, 2026](https://news.skhynix.com/en/q3-2026-business-results/)
- [Samsung Electronics 1Q 2026 Earnings Call, Cautionary Note on Forward-Looking Statements](https://images.samsung.com/kdp/ir/events/2026/2026_1Q_conference_kor.pdf)
- [CFA Institute, Market-Based Valuation: Price and Enterprise Value Multiples](https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/market-based-valuation-price-enterprise-value-multiples?trk=article-ssr-frontend-pulse_little-text-block)
- [Bank of Korea Financial and Economic Snapshot, M2](https://snapshot.bok.or.kr/search/M2)
- [Federal Reserve, Money Stock Measures, H.6](https://www.federalreserve.gov/RELEASES/h6/current/default.htm)
- [Federal Reserve Bank of St. Louis, The Fed’s Balance Sheet and Ample Reserves](https://www.stlouisfed.org/publications/page-one-economics/2026/feb/fed-balance-sheet-and-ample-reserves)
- [Federal Reserve, Overnight Reverse Repurchase Agreement Operations](https://www.federalreserve.gov/monetarypolicy/overnight-reverse-repurchase-agreements.htm)
- [Federal Reserve, Insights from MMF Portfolio Allocations amid Balance Sheet Normalization](https://www.federalreserve.gov/econres/notes/feds-notes/insights-from-mmf-portfolio-allocations-amid-balance-sheet-normalization-20250303.html)
- [IEA, Key Questions on Energy and AI, Executive summary, 2026](https://www.iea.org/reports/key-questions-on-energy-and-ai/executive-summary)
- [SEC, Beginners' Guide to Asset Allocation, Diversification, and Rebalancing](https://www.sec.gov/investor/pubs/assetallocation.htm)

## Images

![A young technician examines a tray of chips in an automated tester at a semiconductor facility.](https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6Mzc3MzAsInB1ciI6ImJsb2JfaWQifX0=--6a1d8198e008a5e62e3edaf460bdb54004cdf60e/ai-85142bce.webp)
![A female technician connects a yellow fiber-optic cable to a rack-mounted network switch in a data center.](https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6Mzc3MzYsInB1ciI6ImJsb2JfaWQifX0=--d393471eb6e8c47900be91bb5ef5efbeec14ead6/ai-3515857f.webp)