Posts Tagged ‘expectation ratio’

ARE EARNINGS ESTIMATES TOO HIGH?

ARE EARNINGS ESTIMATES TOO HIGH?

Courtesy of The Pragmatic Capitalist

This excellent piece (below) was on Bloomberg yesterday and cites another bearish note from Gluskin Sheff’s David Rosenberg.  It notes that the analyst community now expects 35% earnings growth for 2010.  They go on to show that this has only happened 6 times in 75 years and has been accompanied by 10% GDP growth each time.  In essence, the implication is that this recovery is entirely different and is unlikely to rhyme with these other robust earnings recoveries.  This is accurate, but terribly misleading in terms of timing.  Have a look here and continue reading below:

What Rosenberg and Bloomberg fail to be more descriptive about is the timing of these high estimates.  As we have long noted with our expectation ratio and earnings analysis (which has been spot on) the analysts have remained far too bearish for the last year. Where the above analysis goes wrong is in bunching 2010 estimates together as a whole as opposed to breaking them down by quarter.

A closer look at these estimates is vitally important in positioning your portfolio for the coming few quarters. In our 2010 investment outlook we said we were bearish about H2 2010 partly due to the potential for overly optimistic earnings analysis. If you look at current estimates analysts are calling for just 2.7% sequential growth in 2009 Q4 earnings. For 2010 Q1 they are calling for just 1.9% sequential growth.  In a nutshell, they expect earnings to be in-line with the last few quarters (which I believe is utterly naive and lacking in any real analysis worthy of paid employment).   These estimates are almost certainly low.  Where things get interesting is in the later quarters of 2010.

In Q2 analysts are calling for a big jump in growth to 11.3% sequentially and 33% year over year. The same goes for Q3 where they are currently calling for 7% sequential growth and 25% year over year growth. These are big numbers. $19.72 & $20.62 in operating earnings per quarter is essentially what the S&P was doing back in 2006 & 2007 when the economy was at record low unemployment and the banks were cranking their high leveraged ponzi scheme on all cylinders. Can we realistically return to such levels so…
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THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

THE BACKWARDS CHECK MARK RECOVERY IN REVENUES

Courtesy of The Pragmatic Capitalist

Investors who are wondering why stocks haven’t rallied this earnings season need look no further than the actual data.  This earnings season is shaping up to be truly spectacular in terms of expectations, but a look under the hood shows that earnings are less than spectacular.  While bottom line growth continues to be robust, the top line growth continues to come in weak (although better than expected).   Not surprisingly, this is in-line with what we have been seeing in segments of the real economy (see “No Recovery On Main Street” for more info).

Earnings season is over half way over and the analysts have never been more wrong.  Thus far, 74% firms have exceeded expectations while just 19% have fallen shy of expectations.  Of course, it’s not unusual for firms to outperform the analysts expectations, but this ratio of 6:1 is practically unheard of.  Zacks investment research notes that the average earnings season sees a ratio of 3:1 which means this earnings season is twice as good as those of the past.  Not only that, but firms are also beating by a much wider margin than normal.  On average, firms beat by 3%, but are beating by 7.5% this earnings season.

Of the firms reporting 72% have outperformed in terms of operating income while only 43% of them have reported earnings that were higher than the same quarter last year.  On the top line, 64% of firms have outperformed this quarter’s revenue estimates while just 27% of firms are reporting higher revenues than the same quarter a year ago.   Margins are coming in at 7.8% vs the 15 year average of 6.6%.  This shows that margin expansion and cost cutting is leading to much of the bottom line growth.

The discrepancy between expectations and reality is nowhere more apparent than it has been in our expectation ratio.  The ratio clearly shows the schism between actual earnings and analysts expectations.  The ratio was essentially flat this week versus last week’s reading, but continues to display a very wide margin between analysts estimates and the underlying income statement components of the ratio.  We would expect the ratio to narrow in the coming quarters as analysts ratchet up their estimates and narrow the divide.  (See here for more on


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Phil's Favorites

Being on the wrong side of this decade's investing mega-trend

 

Being on the wrong side of this decade’s investing mega-trend

Courtesy of 

Josh Brown and Michael Batnick discuss the recent post “I did everything I was supposed to do”, which is the story of a man whose spent his whole career working for asset management firms and now finds himself on the wrong side of the active vs passive debate. There are real world consequences of the massive outflows of cash coming from actively managed mutual funds. This was Josh’s attempt to look at the issue from the other side.

The post spread around the financial web like wildfir...



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Zero Hedge

BMO: Everything Will Change After Tomorrow's "Quad Witching"

Courtesy of ZeroHedge

Don't look to the Fed to explain today's torrid, global rally: according to a controversial take by BMO's bearish technical analyst, Russ Visch, yesterday’s FOMC announcement was a non-event "as markets shrugged off the interest rate decision and follow-up presser with Chairman Powell", and today's action has an entirely different catalyst, resulting in "no change" to Visch's short-term outlook.

And in another contrarian take, Visch claims that "the quality of the rally since late May (narrow participation, extremely light volume) suggest it’s nothing more than a relief rally within an ongoing medium-term downtrend" as shown in the chart below.

...



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Kimble Charting Solutions

Silver; Multi-Year Bull Market Getting Started?

Courtesy of Chris Kimble.

Is a multi-year bull market about to start in Silver? We should find out soon!

This chart looks at Silver since the early 1970s. It has spent the majority of the past 35-years inside of rising channel (1).

It created a series of flat bottoms and lower highs in the late 1990s. When it broke out at (2), it rallied for years to come, where it gained several hundred percent.

Silver hit the top of this channel back in 2011 at $50, where a long-term bear market started. The 65% decline over the past 8-years has it testing the bottom of this mul...



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Insider Scoop

10 Biggest Price Target Changes For Thursday

Courtesy of Benzinga.

  • Citigroup raised Accenture Plc (NYSE: ACN) price target from $194 to $211. Accenture shares closed at $183.95 on Wednesday.
  • Stephens & Co. boosted the price target for Adobe Inc (NASDAQ: ADBE) from $288 to $327. Adobe shares closed at $291.21 on Wednesday.
  • Credit Suisse boosted the price target on Ferrari NV (NYSE: RACE) from $158 to $185. Ferrari shares closed at $157.83 on Wednesday.
  • Goldman Sachs cut the price target for Tesla ...


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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Chart School

Silver Review

Courtesy of Read the Ticker.

The folks in the federal reserve will debase the US dollar currency to an extreme degree silver will finally lift off the floor.. 

Note: Readers should re watch the silver back screen news video, here.

The following video looks at price action and Wyckoff logic.

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If gold moves, silver wi...

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Digital Currencies

Cryptos Are Crashing As Asia Opens, Bitcoin Back Below $8k

Courtesy of ZeroHedge. View original post here.

Having survived the day's bloodbath in US tech stocks, cryptos are crashing in the early Asian session, apparently playing catch-down to the day's de-risking.

While no catalyst is immediately evident, there are some reports noting 13 large global banks are preparing to launch digital versions of major global currencies next year, though we suspect this drop was more algorithmic that fundamental-driven.

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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