3/31/2007

How to trade earnings Part 2

A variation of the earnings trade is also an useful addition to your trading arsenal. There are a handful of companies which have at any given time very high sales growth. They may or may not have earnings. This happens in biotech, pharma and high technology field. In these kind of companies the sales acceleration acts as a catalyst, kicking off multi month rallies post earnings.

So in addition to 100% plus earnings , I track companies which had a 100% plus sales/revenue growth and recent quarter sales/revenue are above 10 million. Now some of these might have good earnings growth, but the hyper sales growth alone acts as a catalyst in such cases. Now if these companies had no rally prior to the earnings season and show sudden revenue acceleration, you will notice they immediately jump. Again the rallies in such companies last for few quarters or years.

The biggest winners in a year typically come from such hyper growth companies.


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