In the 1980s, I joined Drexel Burnham Lambert... The investment bank was famous for its "junk bond" department. But it also had a quantitative analysis department. That's where I met George...
George's 'Magic Key' Still Works
By Marc Chaikin, founder, Chaikin Analytics
In the 1980s, I joined Drexel Burnham Lambert...
The investment bank was famous for its "junk bond" department. But it also had a quantitative analysis department. That's where I met George...
George was a "quant" with something truly special at the time – a quantitative database.
Now, regular Chaikin PowerFeed readers know I learned about technical analysis all the way back in the late 1960s. That happened at Shearson, Hammill – the Wall Street firm where the boss didn't want brokers to have charts on their desks.
So with my love for the technicals, you better believe I made a point to seek out George when I started at Drexel Burnham Lambert. And it paid off big time...
George mentored me in quantitative analysis. But that wasn't all... He also gave me access to his database.
It was the "magic key."
And as I'll explain today, his original research played a huge role in the development of the Power Gauge. The two factors he specialized in are now core components of the system...
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At Drexel Burnham Lambert, I was the only retail stockbroker who could access George's magic key.
Suddenly, I could combine my "relative strength" research with George's database for "earnings surprise" and "earnings estimate revision" research. And there was more data, too... George also had highly valuable information like "insider trading" activity.
Amazingly, what George taught me back in the 1980s still works today...
Analysts' estimate revisions are the single biggest short-term driver of stock-price movements. That's still true even with high-frequency trading and all the information available to folks on the Internet these days.
In short, a virtuous circle exists for companies that exceed Wall Street estimates.
It works in the other direction, too. Disappointing earnings reports – and importantly, how analysts react to them – drives downward price action in the markets as well.
So I'm not exaggerating when I say that George gave me the magic key.
I was able to take my research to the next level with that key. It gave me the confidence to go off and start an institutional brokerage firm in 1989 with a partner from Philadelphia.
We had institutional clients like famous hedge-fund manager Steve Cohen. He used our research and analytics terminal to successfully build his multibillion-dollar hedge fund.
With George's magic key, I went from burgeoning technical analyst to full-on quant. And I learned that multibillion-dollar hedge-fund managers would pay big money for my tools.
Now, after leaving retirement about a decade ago, my focus in life is sharing those tools with individual investors. And the summation of those tools is the Power Gauge.
In fact, the two factors that George specialized in – earning surprise and earnings estimate revision – are core components of the Power Gauge today. At any time, investors can find out what these factors show for any of the more than 4,000 stocks in the system.
George shared the magic key with me all the way back in the 1980s. It doesn't seem so long ago. But such is life.
Importantly, this magic key led me to build a powerhouse quantitative-analysis firm. Some of Wall Street's most influential fund managers relied on this data over the years.
And as crazy as it might seem... George's magic key still works today.
Good investing,
Marc Chaikin
Editor's note: You can get instant access to the two factors behind George's magic key – and all the others within the Power Gauge – at a steep discount right now. All Chaikin PowerFeed readers can get one full year of Marc's Power Gauge Report newsletter... a year of access to his one-of-a-kind system... and more... for just $49. Get started right here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
-0.04%
9
17
4
S&P 500
+0.04%
126
301
69
Nasdaq
+0.08%
11
73
15
Small Caps
-0.67%
0
0
0
Bonds
-0.50%
Energy
+1.50%
21
0
0
— According to the Chaikin Power Bar, Large Cap stocks are more than Small Cap stocks. Major indexes are mixed.
* * * *
Top Movers
Gainers
TWTR
+7.48%
SYF
+6.18%
VLO
+5.24%
PSX
+5.20%
CTRA
+4.59%
Losers
SCHW
-9.44%
MRNA
-6.49%
TSCO
-4.69%
ETSY
-4.60%
OGN
-4.36%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
HAL, JNJ, LMT, TRV
PLD
FITB, SBNY, TFC
CFG, IBM, NFLX, OMC
HAS
No earnings reporting today.
Earnings Surprises
JBHT J.B. Hunt Transport Services, Inc.
Q1
$2.29
Beat by $0.35
BK The Bank of New York Mellon Corporation
Q1
$0.94
Beat by $0.08
SCHW The Charles Schwab Corporation
Q1
$0.77
Missed by $-0.07
BAC Bank of America Corporation
Q1
$0.80
Beat by $0.06
SYF Synchrony Financial
Q1
$1.34
Missed by $-0.07
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+5.07%
Discretionary
+1.58%
Materials
+1.25%
Industrials
+0.31%
Staples
-0.27%
Utilities
-0.30%
Real Estate
-0.71%
Information Technology
-0.98%
Communication
-1.40%
Financial
-1.62%
Health Care
-2.06%
* * * *
Industry Focus
Biotech Services
21
83
50
Over the past 6 months, the Biotech subsector (XBI) has underperformed the S&P 500 by -29.88%. Its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #11 of 21 subsectors and has moved down 2 slots over the past week.
Indicative Stocks
SRNE
Sorrento Therapeutic
INBX
Inhibrx, Inc.
INO
Inovio Pharmaceutica
* * * *
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