Earnings are always tough to game, that is why I geared this week's Rocket Stock portfolio and column around companies that have international exposure.
Eaton ( ETN), one of the stocks I featured as an earnings play this week, handily beat earnings before the market open Monday but lowered its fourth-quarter guidance numbers, sending shares 4.5% lower in premarket trading that day. In my book Trade Like a Hedge Fund, I discuss and show how such gaps down provide great buying opportunities, especially after the companies beat earnings estimates. Sure enough, Friedman Billings Ramsey the next day upgraded Eaton to outperform, sending shares higher. With shares up about 5% so far this week, I would sell to cash in this gain. I also recommended CSX Corp ( CSX) as an earnings play. Shares are up 6% since I wrote about CSX on Monday as third-quarter profit rose 24% and earnings beat estimates. CSX also made headlines after the companny received a letter from The Children's Investment Fund, an activist shareholder investor. The fund laid into CSX's chief executive, saying "Michael Ward has been the highest compensated CEO in the rail industry over the past two years, despite CSX being operationally outperformed by its peers." I like Ward, especially after these latest earnings numbers, but the fund is right about his compensation. I would lock in this 6% gain with CSX here.