The upcoming reporting season is expected to be more predictable than 2009 with research house and fund manager, Lincoln Indicators, saying the script can almost be written now: "Australian operations good, overseas operations (excluding Asia) bad. We are still on track with guidance and can't wait for 2011."

"We expect the balance of earnings results to be spread evenly of those that surprise on the upside versus those on the downside," said Lincoln CEO, Elio D'Amato.

"This is in contrast to 12 months ago where sentiment was so weak, a heart-beat was sufficient to surpass market expectations. Once again, companies will have to be measured by their merits to determine their long term potential."

Twelve months on from what Lincoln termed ‘the most important reporting season in 70 years' and which ultimately formed the supporting foundation for the bottom in March 2009, the good news is that this reporting season will form the platform for continued market growth.

The major economic focus for market participants will be interest rates, a symptom of Australia's ability to buck the global recessionary trend. The possible threat of inflation will see the Reserve Bank of Australia (RBA) remove its stimulatory bias and return rates to more normal levels. Therefore it is the companies which were unable to put behind them their debt issues which are likely to still be a concern for investors.

Mr D'Amato offers several key insights into what investors expect in the February 2010 reporting season:

• There will be surprises to both the upside and downside
• It should form the platform for continued growth in the sharemarket
• Mining stocks are expected to do well
• Expected upgrades to the banking sector are set to continue
• Look for the first few retailers to report as a gauge for the health of the Australian consumer
• Be wary of stocks with high PEs which have future earnings emphasised into their current price
• Look for stocks that produce great results, but fall below expectations. This will create the opportunity.

"We expect the mining sector to have a very strong reporting period. With strengthening quarterly sales numbers announced in quarterly production reports this month, these businesses have benefited from the rising commodity prices and we expect that these results will be reflected with broadly improving results this period."

"With the CBA's (Commonwealth Bank of Australia) guidance to market coming in above expectations, sentiment across the board is positive."

From a Financial Health perspective, Lincoln sees a key challenge around the sources of financing, particularly for companies outside the top 100. This issue is not likely to surface within the next 12 months as equity markets have proven once again to be a lifeline for a number of cash-strapped businesses that were in deep trouble, but went to the well and the market provided much needed capital.

"The market will throw up opportunities. It always does. This time around we expect to see opportunities in companies which fail to meet analyst expectations, but still produce great results. This short term volatility creates the longer term opportunity", Mr D'Amato said.

Tips for the retail investor to manage the reporting period

With approximately 2,000 companies listed on the ASX, it is impossible for investors to critically assess each company individually. It is prudent to implement and follow a plan to approach the reporting season, and to prepare for this, Lincoln offers the following guidelines for retail investors:

Research the companies in your portfolio prior to the report:

1. Read the company's latest announcements and visit their website to view any recent business developments.
2. Consider calling your broker to discuss the company or search the internet for any news produced by a third party, such as past news articles.
3. Look at the industry it operates in. Is the outlook positive or are there any cost pressures, underperforming businesses or negative sentiment going into 2010?
4. Look at some of the companies' major competitors. Read their announcements in order to help formulate an opinion as to whether the business environment in which they operate in is buoyant.
5. Read the daily business pages in order to keep up to date with all current events, including any information that may require you to change your original evaluation.

Reassess your portfolio after the report:

1. Read the company's result. Did the company produce a profit? Did it improve its EPS? Did the company's level of growth meet your expectations?
2. Read the Director's comments that accompany the result. Did they meet their own expectations? What type of outlook do they put forward for the company? What is their opinion of the current trading environment?
3. Read the reaction to the result in the press or by your broker. If it is a large blue-chip company then you will be able to gauge overall sentiment via comments made by various parties.
4. View the share price reaction. This can be tricky, as often the first reaction will tend to be an over-reaction. Look for a trading pattern to develop.

Evaluate potential stocks to add to your portfolio:

1. Create a watch list of companies you may be interested in buying but do not currently hold. This process can start by selecting a group of companies based on broker recommendations, that may have been covered in the paper or seen on TV, or had mentioned to you via other sources.
2. Once a list of ‘potentials' is derived, do some background reading. Investigate the industry it is in, read recent announcements and develop a firm understanding of what the business does. This will cut down on the decision-making time when the result is released, as a large part of the research would have already been completed.
3. Once the result is released look at the level of growth achieved. Then apply similar criteria as done when re-evaluating your portfolio, ensuring that growth targets were met and that the outlook was positive.
4. If they meet the criteria then an investor may consider adding them to their portfolio. If not, then move on.
5. Of course there may be a result from a company that was not on the investor's radar originally, but has caught their attention. If this is the case, then an investor should look behind the headline and go through all the previous steps to determine if the interest in this company is warranted.

Staying fully informed, making educated decisions to ensure that your share portfolio continues to perform and achieves its investment goals. This is no more relevant than at reporting season.