How to Handle Earnings Season

Keith Fitz-Gerald Jul 13, 2019

It’s hard to believe, but earnings season is upon us again, and it’s widely expected to be a downer, with the average decline in earnings coming in at -2.6%, according to FactSet data.

If that’s where the scorecard finishes, it’ll be the second straight quarter of earnings declines year over year. By comparison, the average estimated earnings decline was just -0.5% just a few short months ago, so this is potentially a big deal.

I say “potentially” because mainstream analysts had the same sort of doom and gloom in mind last quarter and the numbers were stronger than most folks expected. Not surprisingly, anybody betting on a decline got caught flatfooted by a market that ran away from them. I don’t ever want you to be in that position of having to play catch up, especially when you could get ahead of the next leg up.

Speaking of which, I believe this earnings season will play out a lot like last quarter did, meaning that the numbers will be stronger than most investors expect which means you want to be “in to win” if you’re serious about profits like I am. I also believe there will be serious split developing between companies that meet or beat expectations and those that don’t.

Take technology, healthcare, and defense, for example … these are all areas where there’s still strong growth and likely to be stronger future earnings.

On the other hand, I see revenues and earnings getting tighter for retailers, and companies incapable of leaning into the future. Effectively, they’re a value trap for unsuspecting investors.

Invest accordingly!


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Key Takeaways

  1. Forget about the Fed and concentrate on this instead.
  2. Cut losers quickly or the pros will separate you from your money.
  3. Buy the strongest stocks in these three sectors if prices drop because they will “pop.”

 

Until next time,


Keith

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