NEW YORK (TheStreet) -- As usual, the summer earnings season could set the tone for the rest of the year, or at least the period before the holiday shopping season kicks off.
It's usually a bad idea to make aggressive directional bets on stocks ahead of earnings. You'll hit some winners, but the losers can wipe you out.
I only buy a stock, particularly one that will likely react with volatility on bad news, ahead of earnings if the purchase fits into a long-term series of periodic purchases. Otherwise, I like to hunt stocks that get hit on a weak report and drop considerably afterwards.
Simply put, you're working contrary to the market's impatience or overreaction when you stare into the heart of a hurricane and buy post-earnings weakness.Forbes, Patrick Moorhead explains why that is in this defense of Intel Ultrabooks:
Ultrabooks are primarily targeted at the consumer market, secondarily to the commercial market. Each market has different selling cycles of ups and downs. For most regions, the consumer market has three main cycles. First, is "Back to School," which hits primarily in Q3. Then you have "Holiday", which hits primarily in Q4. Then in Q1 you have western markets "Post-Holiday," which hits in January and Chinese New Year in February. Q2 is absolutely the slowest quarter in consumer PCs, and it has been for 20 years. Everyone close to the PC market knows this. That's just one reason why jumping to any conclusions about Ultrabooks based on Q2 are dangerous.Add in Windows 8 anticipation and you can clearly see why it's too soon to judge not only Ultrabook sales, but practically everything Intel, Microsoft and Nokia have their paws in. On weakness, I intend to aggressively buy INTC, followed by somewhat less aggressive purchases of MSFT and smaller, speculative shots at NOK. I would put 65% of a pot of money towards INTC, 30% towards MSFT and the remaining 5% towards NOK.
AMZN data by YCharts
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV