 | ||||||||||
| ||||||||||
It is earnings season again! Earnings season always brings the potential for huge moves in stocks. This quarter, whispers of the Delta variant of COVID continue to rumble throughout the market. Also, inflationary pressures hitting consumers in places ranging from housing prices to pain at the pump. There has already been a huge rotation into industries benefiting from higher inflation, but how long will that trade last? When will it be the time to get back into high-growth tech names again? And, where will the growth really be sustained in a market like that? Lots of stocks are close to all-time highs, along with the broad market indexes, but earnings will decide whether these moves continue or not. Tech and Consumer Cyclical stocks have surged over the course of the last month, catching up to the hottest sector in the market, Energy. While Energy has led the way so far this year, over the last month it was the worst performing sector. Has the glow of the inflation trade already begun to fade? That means that the dartboard approach is not going to work for you this earnings season. You are going to have to choose your investments wisely. In the current stock market environment, investors need to focus on companies with the best fundamentals in order to find the big winners this earnings season. One way to uncover them ahead of time is with our proprietary system called 'Earnings ESP' (Expected Surprise Prediction) which can assist you in uncovering these huge winners before they report earnings. So if you want to increase your odds of success this earnings season—and who wouldn't, given the market backdrop?—then this is one metric you need to know. The Crystal Ball of Earnings Season While it is impossible to know with complete certainty which stocks will deliver positive surprises this earnings season and which ones will disappoint, our proprietary Earnings ESP system determines which stocks have the best chance to surprise with their next earnings announcement. This method has predicted positive earnings surprises with 80.25% accuracy. The Earnings ESP is simply the percentage difference between the 'Most Accurate Estimate' and the 'Zacks Consensus Estimate' for a company's upcoming earnings per share number: Earnings ESP = (Most Accurate Estimate / Zacks Consensus Estimate) -1 The most accurate estimate is the consensus of earnings estimates from analysts over the last 30 days. The Zacks Consensus Estimate, on the other hand, takes the consensus of all analysts' estimates for the quarter, even if that estimate hasn't been revised in three months. Continued . . . | ||||||||||
| ||||||||||
| Timeliness Is Critical The underlying concept here is that the most recent analyst estimate revisions are usually the most accurate. Think about it - if an analyst revises his earnings estimate right before an earnings release, he is likely using fresh information that will lead to a more accurate estimate than what analysts predicted two or three months ago. Just like with a weather forecast that is more accurate for tomorrow than when trying to predict the weather three months from now, the more accurate estimates will usually be the ones that have all the most recent information at their disposal. For example, let's say specialty retailer XYZ Corp reports earnings next week. The Zacks Consensus Estimate for the coming quarter is comprised of eight analysts' estimates and is $0.75. However, three analysts have increased their earnings estimates for XYZ Corp within the last 30 days. Perhaps these analysts have recently visited stores and measured traffic, spoken with suppliers, surveyed customers or incorporated recent economic data into their earnings models. The consensus among these recent estimates is $0.78. That would give XYZ Corp an Earnings ESP of 4% ($0.78/$0.75). This company is likely to deliver a positive earnings surprise. While not all companies that deliver positive earnings surprises will see their stock price rise, studies show that, on average, companies that deliver solid beats see excess returns in their share price for several weeks following the report. This is known as the post-earnings-announcement drift. And finding these stocks before they beat, and then holding them in this 'drift' period, can really boost your returns. Despite several headwinds facing the market, there are bound to be plenty of large positive surprises this quarter. Utilizing Zacks' Earnings ESP system can greatly increase your odds of finding these big winners before they report. How Can the Earnings ESP Work for You? You could start your stock search with this metric. The problem is that in each earnings season, including now, there are hundreds of stocks with positive ESPs. That is why our Zacks research team created a special strategy that uses additional filters to narrow down the lists. It detects rare companies that are most likely to both beat earnings and jump in price. This drives the portfolio I am managing called the Zacks Surprise Trader. I can't share all the details of the secret formula with you, but our system relies on two under-utilized signals coming from the brokerage analyst community. These two whispers are then layered on top of other time-tested elements such as the Zacks Rank and Zacks Industry Rank to find only the best stocks... in the best industries... with the best chances of beating earnings and quickly rising in price. If you would like to receive our precise whisper trading signals through the heart of this earnings season, I invite you to look inside our Surprise Trader portfolio ASAP. Now is the absolute best time to do it. Right now, "Positive Surprise" signals are flashing for 3 select companies that are reporting earnings starting this coming week. Here's the timeline:
So don't miss your chance to beat Wall Street to the punch and make the most of the potential double-digit price pops. Our signals predict big positive surprises and they've been right a remarkably consistent 80.25% of the time! They've led us to many recent gains like +70.9%, +62.6%, +55.9%, and even +114.4% in as little as 5 days.¹ Bonus: Another reason to look into this right away is that you are also invited to download our just-released "Early Warning Alert" report. It reveals Stocks to Sell BEFORE They Report Earnings in the Coming Week. Our strategy works both ways, and you can use this report to avoid companies that are more likely to report negative surprises from July 19-30. See our Surprise Trader stocks and "Early Warning Alert" now » Wishing you great financial success,
Dave Bartosiak is Zacks' resident earnings surprise expert. He selects stocks and delivers commentary for our Zacks Surprise Trader portfolio. | ||||||||||
 | ||||||||||
| ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". https://www.zacks.com/terms_of_service Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through May 3, 2021. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank #1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance_disclosure for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
Post a Comment
Post a Comment