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.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.