When Analysts Run Screaming, Stay Away
As we enter earnings season, let's continue our look at strategies to find the best likelihood of earnings surprise, and to avoid the worst. Last week, I looked at some names with the best earnings estimate revision trend during Q4, the idea being that those names had earnings momentum and could print a strong upside to current Street consensus. This week, we will reverse our strategy and screen for the names with the worst revision trend during the quarter. These names are the "dogs of the Dow," so to speak, although of course we are not limiting ourselves to DJIA names. The "dog" moniker does apply, however.
The strategy on the best estimate trends is to buy them, pure and simple. For the worst trend, however, we do not necessarily want to short them. Typically, the plunging estimate is well recognized on the Street, and often baked into the stock, so a short may or may not work. However, these are names you want to avoid on the long side. When an estimate is falling, you are highly unlikely to get outperformance. If you want a portfolio that will beat the benchmark -- any benchmark -- these names are mud....221 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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