The best mornings are the ones where you wake up to a positive earnings surprise and big profits.
The worst mornings are the ones where you wake up to an earnings miss and heavy losses.
It took several quarters for the market to finally break out of the COVID malaise. Quarterly earnings reports were full of mentions of the pandemic and supply-chain issues related to the global shutdown. Just as the market saw the light at the end of the tunnel, another threat arrived at the horizon…inflation.
That set the Fed into high gear. Shedding billions from its balance sheet and hiking up interest rates. Its hands were tied, as CPI numbers raged to levels not seen in decades.
The stock market suffered as a result, with major market indexes all tumbling down from all-time highs. For example, the Russell 2000 Small Cap Index and the tech-heavy NASDAQ Composite are off 22% and 26% year-to-date. That means that the dart-board approach has not worked all year.
With so much riding on this quarter’s round of reports, one thing is evident:
Nothing can move a stock faster, up or down, than an earnings announcement.
This is especially true today with the stock market coming down from all-time highs and approaching key technical levels. Over the last month, the hottest trade of the year, Energy, has absolutely collapsed. Biotech is starting to heat up, along with Drug Manufacturers and Packaged Goods.
Any stocks unfortunate enough to hiccup this earnings season and not meet the lofty expectations of investors will be severely punished. This will lead to devastating losses for those unlucky shareholders. However, the owners of stocks with positive surprises have the chance to be richly rewarded. So now is the perfect time to align your portfolio to profit in the month ahead.
You should already know Zacks Investment Research specializes in the coverage of corporate earnings. And more importantly, how to profit from this information. So, today I'm going to share with you 3 proven secrets to profit from earnings announcements.
(Hint: Be sure to read to the end as the 3rd strategy is by far the most profitable)
Secret 1: Target 4 Leading Indicators of Positive Earnings Surprises
The most obvious strategy is the reason we are all here. The 4 leading indicators I refer to are the 4 factors of the Zacks Rank. Before you skip this section, let me share some information with you that you may not have known.
In the mid-1970s Zacks’ founder took his mathematical skills to Wall Street where his job was to discover stock picking strategies that would beat the market. He had a simple theory that was the precursor to what became the Zacks Rank.
His research focused on finding stocks that were more likely to have a positive earnings surprise and jump on the news. The journey led him to what we know as the 4 factors of the Zacks Rank. Each individually increases the odds of owning stocks that will enjoy a positive earnings surprise.
However, when you combine them together inside the Zacks Rank it becomes an almost obscene advantage for investors.
Continued . . .
------------------------------------------------------------------------------------------------------
Buy These Stocks BEFORE They Report Earnings
Next week 52 companies are set to report earnings. What if you could know in advance which few would shock Wall Street by beating earnings expectations and pop in price?
Now you can.
Zacks' proprietary "ESP" formula predicts positive earnings surprises with unthinkable 80.93% accuracy. Investors following its picks have seen double-digit gains in a matter of days.
What stocks is the system picking today? Find out before doors close to new investors at midnight Monday, July 11.
See Surprise Stocks Now >>
------------------------------------------------------------------------------------------------------
Secret 2: Stop the Bleeding
This second secret is simple, yet hard for most investors to do. So, I'm going to repeat it again and again...until I wear out the words!
Sell All Companies with a Negative Earnings Surprise!
Yes. Immediately. Do Not Pass Go. Do Not Collect $200. Sell! Even after it falls at the open. Even if it is for a substantial loss. Why? Better to take a 5-10% loss in the short run than a 20 to 40% loss in the long run.
Keep in mind how earnings estimates are created. Both company executives and brokerage analysts do their best to create conservative estimates that the company should easily beat. It's all about lowering the bar. So when a company falls short of those watered-down estimates it points to one of two serious problems:
• Industry conditions have deteriorated and thus they missed their forecasts. This problem most likely will not correct itself in the near-term, leading to further disappointment.
• Management is incompetent. Meaning that they are clueless when it comes to estimating their own earnings. Or growth strategies are simply ineffective.
Either reason is enough cause to abandon the stock immediately and move on to greener pastures.
Secret 3: Harness Real "Earnings Whispers"
Consider the following chain of logic:
• Wall Street analysts create earnings estimates.
• These analysts are highly motivated to create conservative estimates that can easily be beat. Why? If they have a Buy rating on a stock, and the estimates are too high, then the stock is more likely to disappoint. This would send the stock price lower and the performance on their stock ratings would be poor (leading to lower compensation for the analysts).
• The closer to earnings season we get, the more accurate the information the analyst has at their disposal to put into the estimate since there is less time left to estimate performance.
Add it all up and no analyst would increase estimates close to the date of the earnings report unless there was a DARN GOOD REASON. Focusing on those estimates closest to the earnings announcement is where we've found the "whisper that becomes a scream." ...a clear indication from the analyst community of stocks more likely to beat earnings by a wide margin. And most importantly, rise on that news.
The Easy Way to Apply These Secrets
The research team at Zacks has created a special strategy that uses additional filters to detect an elite crop of companies that
• have a high probability of beating earnings (our signals have been correct a remarkable 80.93% of the time)
• are likely to jump significantly in price.
This is critically important because hundreds of stocks are likely to achieve positive surprises – but most investors can’t buy all of them.
This special strategy drives the portfolio I manage called 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.
The formula has turned up some great winners recently, including closed gains of +114.4%, +77.9%, +62.5%, +36.6%, and +22.5% in as little as 6 days.¹
If you would like to receive precise whisper trading signals like these 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. "Positive Surprise" signals are flashing for a small handful of companies.
The first of these special stocks will be posted after the market opens Monday morning and more will follow. Don't miss your chance to beat Wall Street to the punch and make the most of the potential double-digit price pops.
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 Weeks. Our strategy works both ways, and you can use this report to avoid companies that are more likely to report negative surprises.
But don't delay. Our "surprise" recommendations are generally closed to the public. Today the portfolio is open again, but your chance to gain access ends on midnight Monday, July 11.
See our Surprise Trader stocks now >>
All the Best,
Dave
Dave Bartosiak is Zacks' resident earnings surprise expert. He selects stocks and delivers daily commentary for our 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.
Image: Bigstock
3 Secrets to Quick Profits this Earnings Season
The best mornings are the ones where you wake up to a positive earnings surprise and big profits.
The worst mornings are the ones where you wake up to an earnings miss and heavy losses.
It took several quarters for the market to finally break out of the COVID malaise. Quarterly earnings reports were full of mentions of the pandemic and supply-chain issues related to the global shutdown. Just as the market saw the light at the end of the tunnel, another threat arrived at the horizon…inflation.
That set the Fed into high gear. Shedding billions from its balance sheet and hiking up interest rates. Its hands were tied, as CPI numbers raged to levels not seen in decades.
The stock market suffered as a result, with major market indexes all tumbling down from all-time highs. For example, the Russell 2000 Small Cap Index and the tech-heavy NASDAQ Composite are off 22% and 26% year-to-date. That means that the dart-board approach has not worked all year.
With so much riding on this quarter’s round of reports, one thing is evident:
Nothing can move a stock faster, up or down, than an earnings announcement.
This is especially true today with the stock market coming down from all-time highs and approaching key technical levels. Over the last month, the hottest trade of the year, Energy, has absolutely collapsed. Biotech is starting to heat up, along with Drug Manufacturers and Packaged Goods.
Any stocks unfortunate enough to hiccup this earnings season and not meet the lofty expectations of investors will be severely punished. This will lead to devastating losses for those unlucky shareholders. However, the owners of stocks with positive surprises have the chance to be richly rewarded. So now is the perfect time to align your portfolio to profit in the month ahead.
You should already know Zacks Investment Research specializes in the coverage of corporate earnings. And more importantly, how to profit from this information. So, today I'm going to share with you 3 proven secrets to profit from earnings announcements.
(Hint: Be sure to read to the end as the 3rd strategy is by far the most profitable)
Secret 1: Target 4 Leading Indicators of Positive Earnings Surprises
The most obvious strategy is the reason we are all here. The 4 leading indicators I refer to are the 4 factors of the Zacks Rank. Before you skip this section, let me share some information with you that you may not have known.
In the mid-1970s Zacks’ founder took his mathematical skills to Wall Street where his job was to discover stock picking strategies that would beat the market. He had a simple theory that was the precursor to what became the Zacks Rank.
His research focused on finding stocks that were more likely to have a positive earnings surprise and jump on the news. The journey led him to what we know as the 4 factors of the Zacks Rank. Each individually increases the odds of owning stocks that will enjoy a positive earnings surprise.
However, when you combine them together inside the Zacks Rank it becomes an almost obscene advantage for investors.
Continued . . .
------------------------------------------------------------------------------------------------------
Buy These Stocks BEFORE They Report Earnings
Next week 52 companies are set to report earnings. What if you could know in advance which few would shock Wall Street by beating earnings expectations and pop in price?
Now you can.
Zacks' proprietary "ESP" formula predicts positive earnings surprises with unthinkable 80.93% accuracy. Investors following its picks have seen double-digit gains in a matter of days.
What stocks is the system picking today? Find out before doors close to new investors at midnight Monday, July 11.
See Surprise Stocks Now >>
------------------------------------------------------------------------------------------------------
Secret 2: Stop the Bleeding
This second secret is simple, yet hard for most investors to do. So, I'm going to repeat it again and again...until I wear out the words!
Sell All Companies with a Negative Earnings Surprise!
Yes. Immediately. Do Not Pass Go. Do Not Collect $200. Sell! Even after it falls at the open. Even if it is for a substantial loss. Why? Better to take a 5-10% loss in the short run than a 20 to 40% loss in the long run.
Keep in mind how earnings estimates are created. Both company executives and brokerage analysts do their best to create conservative estimates that the company should easily beat. It's all about lowering the bar. So when a company falls short of those watered-down estimates it points to one of two serious problems:
• Industry conditions have deteriorated and thus they missed their forecasts. This problem most likely will not correct itself in the near-term, leading to further disappointment.
• Management is incompetent. Meaning that they are clueless when it comes to estimating their own earnings. Or growth strategies are simply ineffective.
Either reason is enough cause to abandon the stock immediately and move on to greener pastures.
Secret 3: Harness Real "Earnings Whispers"
Consider the following chain of logic:
• Wall Street analysts create earnings estimates.
• These analysts are highly motivated to create conservative estimates that can easily be beat. Why? If they have a Buy rating on a stock, and the estimates are too high, then the stock is more likely to disappoint. This would send the stock price lower and the performance on their stock ratings would be poor (leading to lower compensation for the analysts).
• The closer to earnings season we get, the more accurate the information the analyst has at their disposal to put into the estimate since there is less time left to estimate performance.
Add it all up and no analyst would increase estimates close to the date of the earnings report unless there was a DARN GOOD REASON. Focusing on those estimates closest to the earnings announcement is where we've found the "whisper that becomes a scream." ...a clear indication from the analyst community of stocks more likely to beat earnings by a wide margin. And most importantly, rise on that news.
The Easy Way to Apply These Secrets
The research team at Zacks has created a special strategy that uses additional filters to detect an elite crop of companies that
• have a high probability of beating earnings (our signals have been correct a remarkable 80.93% of the time)
• are likely to jump significantly in price.
This is critically important because hundreds of stocks are likely to achieve positive surprises – but most investors can’t buy all of them.
This special strategy drives the portfolio I manage called 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.
The formula has turned up some great winners recently, including closed gains of +114.4%, +77.9%, +62.5%, +36.6%, and +22.5% in as little as 6 days.¹
If you would like to receive precise whisper trading signals like these 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. "Positive Surprise" signals are flashing for a small handful of companies.
The first of these special stocks will be posted after the market opens Monday morning and more will follow. Don't miss your chance to beat Wall Street to the punch and make the most of the potential double-digit price pops.
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 Weeks. Our strategy works both ways, and you can use this report to avoid companies that are more likely to report negative surprises.
But don't delay. Our "surprise" recommendations are generally closed to the public. Today the portfolio is open again, but your chance to gain access ends on midnight Monday, July 11.
See our Surprise Trader stocks now >>
All the Best,
Dave
Dave Bartosiak is Zacks' resident earnings surprise expert. He selects stocks and delivers daily commentary for our 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.