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ZACKS
Cause and Effect

The action Monday and Tuesday is typical for a consolidation period. That is where the overall market is about breakeven yet some stocks are big winners while others are big losers. Often it has to do with what industry or market cap the company belongs to (right now small caps are getting hammered while large caps are enjoying some time in the sun). And quite often they switch places as the consolidation period rolls on.

At times like these you begin to realize that recent price action for your stocks is not a good guide of where they are headed next. For me there are 2 stronger indicators of future stock prices:

1) Earnings Estimate Revisions: Yes, the power behind the Zacks Rank. If they are going up, then a stock has a much greater likelihood to outperform over next 1-3 months.

2) Valuation: If the reasonable valuation for a stock is greater than what it trades for today, then there will be a natural pull in that direction over time.

Price action comes in a distant third behind these two in determining where a stock is headed next. That's because you have to realize that the earnings estimates and valuation are the "cause" behind the "effect" of stock prices over time.

Remember that institutional investors are the 800 pound gorillas of the investing world managing trillions in assets. The majority of these money managers rely upon the above fundamentals to determine what to buy and sell.

This is old hat to long time followers of the Zacks Rank investment philosophy. If you have not yet studied the merits of our system, or you need a little refresher course...then no better time than the present. Check out our free guide that gets you on the road to understanding and profitably implementing the Zacks Rank:

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Steve Reitmeister (aka Reity...pronounced "Righty")

Executive Vice President

Zacks Investment Research

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Bull & Bear of the Day

Zacks Rank #1

St. Joe (JOE)

With the recent timberland sale, this real estate developer can focus on its core activities.

 

Zacks Rank #5

Endologix (ELGX)

Estimates have come down significantly after disappointing 2014 guidance by the management.


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This Week's Growth & Income Stocks: (MMC) (SSS)

Growth & Income Stock Strategist, Todd Bunton, highlights Marsh & McLennan (MMC) and Sovran Self Storage (SSS) on March 19, 2014.

2 Revenue Weighted ETFs to beat the market

Revenues are arguably one of the best indicators of financial health of a firm.

Earnings HQ

Today's Noteworthy Earnings Before the Bell:   ››  MOVLNNFRANIBPEGLT

Today's Noteworthy Earnings After the Bell:   ››  PAYXFULRVNCWPTCGIX

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Visit the Zacks Earnings Calendar

Recent Earnings Winners

Company Symbol Reported Surprise %Price Chg
HIGHPOWER INTERNATIONAL INC HPJ Mar 25 +0.09% +7.05%
WSI IND INC WSCI Mar 25 +0.09% +5.97%
MCCORMICK & CO NON VTG CS MKC Mar 25 +0.62% +5.47%
ORIENT PAPER INC ONP Mar 25 +0.19% +5.04%
ADMINISTRADORA DE FONDOS DE PENS PVD Mar 25 +1.35% +4.91%

See All »

Best Earnings ESP Stocks  

Company Symbol Consensus
Est.
Most
Accurate Est.
Reports Zacks Rank ESP
STRONGCO CORP T.SQP 0.10 0.11 Mar 25 1 +10.00
ACCENTURE PLC ACN 1.04 1.06 Mar 27 2 +1.92
ALCOA INC AA 0.04 0.05 Apr 8 2 +25.00
CARNIVAL CORP CCL 0.07 0.09 Mar 25 2 +28.57
GREENBRIER COS GBX 0.60 0.62 Apr 3 2 +3.33
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