Now, this is going to be fun

Ask any of my subscribers, and they’ll tell you, I love earnings season, really and truly.

You only have to look at today’s market action to understand why. The Dow is up 200 points on positive earnings news.

But this goes so much further than one good day for the indices.

My love affair with earnings season stems from the fact that over the past 30 years, I have found that some 90% of my market-trouncing profits were made during the critical weeks of earnings season. I’m talking double-digit profits from safe, reliable blue chip stocks like these:

  • Apple Inc. (AAPL) announced 73% sales growth, doubled their earnings growth and posted a 30% earnings surprise on January 24–pushing the stock 24% higher.
  • Novo Nordisk A/S (NVO) posted 12% sales growth, 19% earnings growth and a 16% earnings surprise on February 2. This sent the stock on a profit run of 25% and climbing.
  • Teradata Corp. (TDC) reported that it had its best quarter ever in terms of sales and earnings growth on February 9. Sales advanced 23%, earnings jumped 25% and the company posted a 6% earnings surprise. We’ve added another 19% gain to our position thanks to earnings.

But let’s be clear, these double-digit swings can work in the opposite direction, too. That’s because earnings season is Judgment Day for any company.

Case in point is JPMorgan & Chase Co. (JPM), which announced lackluster first-quarter results last Friday. Even though the company increased its earnings per share by 2% due to lower share count, the company’s net income still slipped 4%. Investors did not react well to this, so shares gapped down 4% after its earnings announcement.

Yes, in today’s market, even stocks that have been on a run or stocks considered to be “old reliables” aren’t safe havens anymore. If the quarterly report isn’t good, Wall Street will sentence a company’s stock to a 5%, 10%, even 20% drop in price. (Ouch!) But if a company’s earnings are strong, you can bank on instant and dramatic profits.

That’s why for the next two weeks we’re going to watch every report, and I’m going to be there to help you navigate to the biggest winners and away from the biggest losers.

Today, we’re going to focus on three major semiconductor stocks that make waves each time earnings season comes around. One you should sell, one is a hold and the last is a great buy. I’ll put all three head to head to show you what’s working this earnings season and how to profit.

Earnings season has begun in earnest. It started with Alcoa (AA), and it won’t end until the end of May. The moves you make now will impact your wealth, so let’s start separating the good from the bad in one of the most powerful sectors–Semiconductors.

Semiconductors enable just about every electronic device from your computer and smartphone to your radio and LED lights.

Companies in this industry are in a constant battle to make semiconductors smaller, lighter, faster and more efficient. That’s one reason why your first cellphone had to have its own carrying case and today you can slip it in your pocket.

The biggest player in this market is Intel Corp. (INTC) with a market cap of over $140 billion. At about half that size is Advanced Micro Devices (AMD), and bringing up the rear is Texas Instruments Inc. (TXN). So, does bigger mean better when it comes to semiconductor companies?

In this case it does. When you put these companies head to head to head, you see that, in terms of fundamental strength, INTC is leaps and bounds ahead of the competition.

INTC Stock Analysis

<td width="20" align="center" valign="top" style="border:#3399CC solid thin;"A

Fundamental Garde: B
Sale Growth: B
Operating Margin Growth: C
Earnings Growth: C
Earnings Momentum: C
Earnings Surprises: D
Analyst Earnings Revisions: B
Cash Flow: C
Return on Equity: A
Qualitative Grade: A
Total Grade:
AMD Stock Analysis
Fundamental Garde: C
Sale Growth: D
Operating Margin Growth: C
Earnings Growth: F
Earnings Momentum: F
Earnings Surprises: B
Analyst Earnings Revisions: A
Cash Flow: A
Return on Equity: A
Qualitative Grade: C
Total Grade: C
TXN Stock Analysis
Fundamental Garde: C
Sale Growth: D
Operating Margin Growth: D
Earnings Growth: D
Earnings Momentum: D
Earnings Surprises: B
Analyst Earnings Revisions: F
Cash Flow: B
Return on Equity: A
Qualitative Grade: D
Total Grade: D

 

 

As you can see, each of these companies has strong return on equity, but you have to look at the whole picture to know which stocks to buy and which to sell. Overall, INTC has the better fundamentals and buying pressure, and the stock’s performance has given it the investor support it needs to be a solid source of profits for you in the upcoming weeks.

In the last 12 months, INTC has gained 43% while AMD and TXN have lost 6% of their value.

Now, INTC will report earnings after the market close today. The company has surprised analysts in each of the last four quarters, and analysts have been raising their estimates for the company to try to keep up–both bullish signs for the company.

AMD will report earnings on Thursday and TXN will report next Monday. Neither of these companies has received analyst upgrades, and while the stocks may receive some benefit from INTC’s report, I’m not expecting fireworks when it comes to these companies providing the kind of strong, wealth-building profits INTC can provide. Plus, INTC has the highest dividend payment of the three.

So, it’s clear who the winner of the semiconductor wars will be this quarter, and you should adjust your holdings accordingly–and fast. Do it before these earnings are reported, and you’ll thank me in the weeks and months to come.

This Is Just the Beginning

I want you to watch your inbox every day this week as we’re going to tackle a new sector, discuss the opportunities and pitfalls, and home in on the stocks to buy and sell this earnings season.

Here’s a sneak peak of what you can expect this week:

  • Wednesday: The most misunderstood sector–Retail.
  • Thursday: The big, bad banks.
  • Friday: Stocks powering the Internet.

This is an important Market 360 earnings series that you won’t want to miss, so keep your eyes peeled for daily updates from me.

Sincerely,

Louis Navellier

Louis Navellier

P.S. For access to more earnings season winners, try my Blue Chip Growth newsletter. I have 35 stocks primed for earnings season and you can get them risk-free.

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