The Smarter Way to Play This Misleading Earnings Surprise

Shah Gilani|July 18, 2023

Earnings season has kicked off, and we’re already seeing some surprises. But, I have to warn you to be very, very careful with what you’re seeing out there, because a lot of numbers that look good on the surface don’t look so good when you delve a little deeper. This is especially going to be true of banks, for whom all the problems of the most recent banking crisis have not gone away.

First and foremost, analyst projections for earnings have been lowered for several sectors across the board. So while you might see an uptick in earnings numbers beating those estimates, you have to remember that the hurdle those companies had to overcome is lower than it was last quarter.

With banks in specific, we’re still dealing with a high interest rate environment that’s creating higher funding costs, and they’re still going to have to reconcile depreciating values on their loan books, especially if they’ve got assets like commercial real estate in their portfolios.

And those issues are starting to show up in the numbers if you dig a little deeper. That’s especially the case with the bank stock I’ve picked out for this week’s Take It to the Bank recommendation, which soared 13% as a result of short-covering after beating EPS estimates and showing some improvements to the total value of their assets under management.

Look past the surface, though, and everything’s far from wine and roses, which tells me there’s a much smarter way to make money by “fading” this stock and taking profits when that gap up fills back in.

Let me show you exactly what to do. It’s all in the video below:

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We’ll be taking a deeper look at the top moving stocks tomorrow, and I’ll have more on who the real earnings winners and losers are. Keep an eye on your inboxes until then.