Yet another double digit earnings season | stockbee

5/15/2007

Yet another double digit earnings season

As the earnings season winds down, some trends are clear. Yet another double digit quarter. Next quarter earnings expectations are rising. Large caps and mid caps have stellar earnings compared to small caps. Technology sector is laggard and Health Care and Materials sectors lead in surpassing earnings.
We are about 90% done with earnings season and earnings continue to surprise to the upside. As things stand now, it�s about an even money bet that the median S&P firm will post double-digit year-over-year earnings growth. That would make it the 19th straight quarter. Looking forward to the second quarter, the median expectation is for 8.9% growth, which easily puts it within range of double-digits given anything like a normal surprise performance. So it is not unreasonable to think this streak may continue to 20 quarters. While the 10.1% growth is still lower than previous quarters it is much better than expected. The surprise ratio now stands at 3.0:1, down from 3.5:1 a week ago, and 3.8:1 two weeks ago but still very strong. Positive surprises have been widespread, with every sector showing more positive surprises than disappointments with the exception of Utilities, and the Utilities are tied.

8 comments:

hottpotato said...

salutations PD-what is the float for REDF? looking for it and cant dig it up-you are in india ? what are the financials on REDF-there is a lot of missing info on yahoo financials-thanks-T

Pradeep Bonde said...

REDF float is 15 million. Try moneycentral for earnings data.

hottpotato said...

thanks you

ybn said...

I know you have discussed that before but I still struggle with this problem. Let say I bought some stocks based on earning breakout or episodic pivots and the stocks such as NGA, FRPT, HDNG, ICFI are doing very well. Looking at the earning record, float and all the other factors, these stocks have the potential to become double bagger or maybe even reach the 1500% potential. Now, the market is starting look shaky, may reverse, or at least correct in the near future. Once the trend changes we know that 3 out 4 stocks follow the trend and these stocks have a good chance of giving back a big portion of the profit. What do you do at this point? Do you sell and take the profit? Do you hang tough for the big potential? If I just tighten my stops I am almost sure they are going to get hit at a lower point during the correction. You may suggest to sell and buy back later if the market resumes the bullish move. That's easier said than done. It is very difficult to buy back over-extended stocks far up from their pivot point. In summary, my question is: what do you do with potentially great stocks during a correction and not risking giving back all the profit?

Susan said...

i think PD will sell instead of hold thru these tough times. Why would you give up your gains and hold thru anyway? unless you are a long term investor.

pradeep, is WINN on your radar?

Pradeep Bonde said...

YBN
I will sell and buy later. But currently I am experimenting with a 25 positions with 4% allocation and no price stop in one account.The idea is to re balance it after more than one year holding. Primarily to hold long term positions and get favorable tax treatment.

Susan
Was busy in morning, did not look at market.

ybn said...

Sell now buy later does not really works for me. It is usually sell now buy something else. The concept of no stops, long term account is very interesting. You still have to keep the corner of your eye on the account for disaster stocks (such as accounting problems). Maybe you should balance every quarter after earning reports. In any case good luck and keep us posted.

Pradeep Bonde said...

My research and experience with IBD 200 and Double Trouble shows that the ideal holding period for them is at best 2-3 quarters.
These stocks have a compressed rally in very short time frame and holding them for long diminishes returns. You need to be willing to handle high turnover if you want to trade them. That is one of the reason that CANSLIM based mutual fund is looking like a disaster in making.