There is no doubt that the global economy is struggling. In fact, there are parts of the world that will get much worse before they get better.

• Europe's debt and growth "solutions" are in serious doubt.
  
• China's growth is slowing more than expected.
  
• Even the United States is experiencing major growth pains as was most evident with Monday's ISM Manufacturing report.

To many, it seems like the worst time to be investing. And that is exactly why it might be the best time. Especially with earnings season on our door step.

How's that?

All the concerns noted above will depress stock prices for those with the most international exposure. Some of these stocks will be quite deserving of this discount. But some will be misjudged and will explode higher when their earnings come out.

How do you know which is which?

Amazingly there is a little known trail of breadcrumbs that leads us to those best stocks. I will share the details on how to follow this trail below.

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Standing on the Shoulders of Stock Analysts

You see, when you expect the worst, you're probably going to be less likely to take excessive risk. Think about it this way: if you were a meteorologist in a major city like Chicago or New York, with millions watching and listening, you have a certain level of responsibility to those citizens.

Now what if you expected exceedingly dangerous storms -- would you get on air and tell people it's safe to go for a leisurely stroll in the park? Of course you wouldn't, unless you were pretty darn sure the storms were going to pass outside the city or not occur at all.

We can think of stock analysts in a similar way. Stock analysts crunch corporate, sales and economic data on a daily basis and offer their predictions based on that data.

Not All Are Equal

Just like meteorologists, there are good analysts and bad ones (we will call them average). Many analysts actually tend to "herd together", which is what forms the consensus estimate that you see in the headlines...but the best ones or those with superior information can sometimes drift from the pack; and this is when you should pay attention.

The problem is that most people don't, nor do they even know what to look for.

My method tracks even the slightest actions of analysts just ahead of an earnings announcement, because this is an extremely critical time for them and it's also about the time when they have received all the data for the past quarter (which is what the company will be stating during its report).

Even though these moves may not be noticed by the masses, we have found that they are extremely telling. They are part of the breadcrumb trail that I mentioned earlier.

Q2 Perfect Timing?

When times are tough and economies are struggling, analysts are going to be less likely to "stick their neck out" and increase their estimate just ahead of a report unless they are certain of their findings. This is especially true if that estimate is significantly higher than the consensus.

Being that many companies offered flat or lower guidance in Q1, it will be even more important for analysts to have serious convictions if they are going to raise estimates ahead of a report.

This is why I think that Q2 will be a strong one for us. This season brings with it a combination of lower stock prices, lower valuations (on average) and cautious analysts that will only act if they have strong conviction. I will also be tightening up the criteria of the candidates I select, which should prove to be a successful mix for us.

Everyone expecting the worst could actually be the best thing for us.

How to Take Full Advantage

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Look forward to chatting and trading with all of you this earnings season!

Jared

Jared Levy is a Senior Equities Strategist with special expertise in earnings surprises. He provides private recommendations and commentary for the groundbreaking Zacks Whisper Trader.