Don't you hate when you read or hear that "XYZ's earnings were better than expected"? I know I do. Whenever I hear that, I simply have to click on the next headline or change the channel. Many investors and traders despise the "better than expected" statement because they don't own that stock, and because it just beat earnings is likely about to gap higher.
With earnings season upon us, I decided to scout names that may report nice upside surprises. That way, perhaps we can find joy this earnings season when we see the "better than expected" headline.
I've compiled my picks in the
portfolio at Stockpickr.com.
Volatility was very robust last week as the indices broke through new highs only to pull back sharply Thursday. This type of swinging trader's market served Rocket Stock investors well.
Before we look at this week's stocks, let's take a quick look at how
last week's Rocket Stock picks
- Yum! Brands (YUM) - Get Report (a midweek sell), up 10% .
- Akamai (AKAM) - Get Report (another midweek sell), up 13% .
- China GrenTech (GRRF) (a midweek sell), up 11% .
- BEA Systems, ending the week up a whopping 34% on late week takeover bid .
- VMware (VMW) - Get Report (a midweek addition), up as much as 12% before pulling back to end the week up 0.5% from Wednesday .
- ConocoPhillips (COP) - Get Report, up as much as 5% but ending the week up 2.5% .
- Take-Two Interactive (TTWO) - Get Report, up more than 7% but ending the week up 2.8% .
- Panera Bread (PNRA) , up as much as 3%-plus but ending the week down almost 1% .
- Cardica (CRDC) , up more than 16% but ending the week 2%-plus .
- NutriSystem (NTRI) - Get Report, up 4.7% but ultimately ending the week down 2% .
- Polo Ralph Lauren (RL) - Get Report, ended the week down 7% .
Dow Jones Industrial Average
ended the week up 0.2%.
Now let's take a look at
First up is
, which reports third-quarter earnings results Monday morning. This electrical equipment manufacturer is a play on global infrastructure as well the global technology boom.
With thriving international business and growth, Eaton is poised to handily crush earnings. Last quarter it reported "better than expected" earnings. Let's not forget that a weaker U.S. dollar helps these companies print money due to the exchange rate.
A weaker dollar is likely to boost this global infrastructure name's chances of exceeding earnings expectations.
Next up is
, which reports earnings after the market close Tuesday and hosts a conference call before Wednesday's bell. The rail sector could be one of the best investments for your money over the next 10 years (as evidenced by
and other major hedge funds loading up on shares). But let's see why CSX might explode off of earnings.
First off, chemical and agriculture products along with phosphates are in a total bull market (look at phosphate plays
and have been so for the past six to nine months. It is logical that if demand is high for such products then demand for transporting them will be high.
CSX is conducting a huge campaign to return capital to shareholders with a $2 billion stock-buyback plan and a 1.1% yield. Investors like
are also betting on the stock. The railroads, with little capex or competition, are likely the way that commodities will make their way from the Midwest to the West Coast en route to China.
Look for international demand to increase revenue as well as a buyback to increase earnings per share.
Another stock worth looking into is
St. Jude Medical
, which reports earnings on Thursday morning. The company manufactures medical devices for heart-related and neurological conditions in the U.S. and internationally.
Because Stockpickr loves international growth, we focused most of our earnings plays on companies that have this exposure. And because
has been dead money, investors appear to have been trading out of Boston Scientific and into St. Jude, which offers them a safer way to play the "heart health issue" America faces today.
Last quarter, St. Jude reported great earnings and gapped 5% higher as a result. Shares are now back to their pre-earnings level. Buyout rumors, which recently helped propel the stock near a 52-week high, have died down as well.
Other stocks worth looking into as pre-earnings buys are
For the rest of this week's picks, check out the
To find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:
- Today's Hot List: This daily list is a must-view every midday to see what stocks are making the biggest moves and why.
- Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard. When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. They will be buying at the lower prices, so you should be also.
- Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks.
- Biotech Short Squeezes. Dendreon (DNDN) and others can often be found in this category.
- Stocks Rising on Unusual Volume: These are potential breakout stocks.
- Stockpickr's System Trades of the Day: These are trades triggering that day in various backtested trading systems we've developed.
- Stocks With Unusual Option Activity: Perhaps someone knows something?
- Latest Activist Situations: These are beaten-down stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on your must-view list.
One final place to frequent is the
section on Stockpickr, where ideas such as those presented in this article are thrown around daily.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.