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Cramer: 5 Earnings Trades the Market Always Gets Wrong

Stocks in this article: MCD TRV KMB VZ JNJ

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NEW YORK ( RealMoney) -- There's something very humdrum about the predictability and reaction to earnings this time around. But we will still attempt to shoehorn everything through the eyes of the stocks, not the companies.

Here are some time-honored patterns:

McDonald's (MCD) is a serial runner-upper ahead of earnings, and then when it reports, it reports with pizzazz and style, beating even the toughest numbers, and then it sells off, so we have to search for the disappointment. Believe me, there isn't one, and that is why each faux disappointment has been an opportunity to buy on the second day when the profit-takers have vanished.

Verizon (VZ) always seems to disappoint on the bottom and top lines, usually a function of not yet making enough money on the phones it subsidizes. At the same time, we see someone unhappy with the wireline business each quarter. First, wireline should have vanished by now. The fact that it remains a business, let alone a good one, is always shocking to me. Verizon is a buy because of the yield and because it has the capital to boost that dividend.

Kimberly-Clark (KMB) is almost always horrible, so the stock gets hammered, but not because it reports a terrible number and a guide-down. That has been the experience for ages. It goes down because it has always run up, with buyers thinking, "This is the breakout quarter." Wait a couple of days and you will then hear the "breakout brigade" once again saying the next quarter is the earnings beat. In the meantime, the company will boost the best dividend in the soft goods sector, and it will settle in as a buy not long from now.

Johnson & Johnson (JNJ) often goes down ahead of the quarter as people expect this stock to let people down, in part because lawsuits and recalls now seem to be quarterly expense lines. Then people say, aha, the earnings aren't that bad, the lawsuits and recalls have to be almost done, and the pipe is OK. So they buy it.

Travelers (TRV) gets hit because it misses the number, as it is having a hard time investing for a good return. Travelers is a great company that's very conservative and didn't blow itself up with bad investments in an attempt to boost returns. But what matter here are premiums. They are going higher. So tomorrow it stabilizes and starts going higher along with the premiums, the only metric that really matters.

And that's the rhythm of earnings pretty much every quarter. Familiar patterns that still elude people almost every time. You'd think they would have it down pat by now. But no one ever seems to. I left the hedge fund in part because this stuff became mentally unchallenging, even as it was hugely lucrative.

I hope it's lucrative now for you.

At the time of publication, Cramer had no positions in stocks mentioned.

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