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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

2 Stellar Stocks for Earnings Season

I scoured the landscape and came up with a dozen stocks that topped quarterly profits by at least 20%. Here they are...

You can quickly spot some clear themes from this group. For example, Bank of America (BAC) and Citigroup (C) soared past estimates. Both trade below book value and both have very low price-to-earnings (P/E) ratios.

That's where the similarities end. Bank of America only exceeded forecasts because of a reversal of previous loan write-downs and a lower-than expected tax rate. Dig deeper into the quarterly results, and you'll find a still-troubled bank with ongoing legal headaches. Citigroup, on the other hand, is getting healthier, despite my recent mea culpa that an expectation of a big stock rebound was quite premature.

Shares have rallied 20% since that sobering update, and the quarterly upside was delivered through good old-fashioned business improvements and not one-time accounting gimmicks. When the dust finally settles over the troubled banking sector, investors are likely to refocus on tangible book value as a measure of a financial sector stock's worth.

Merrill Lynch pegs that figure at $61 a share for Citigroup -- twice the current price. It may take some time to get there, but this still looks to be a very inexpensive stock, and Citigroup may well benefit from the distress -- and subsequent retrenchment -- from rivals both in the United States and in Europe.

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