We’re coming into October, and you know what that means.
Leaves change color, the weather cools and thankfully, the fire, hurricane and tornado seasons come to a close.
It’s a cheerful time of year, and that goes for the markets as well. Except for October 1987, stocks have done well during the month over the past 30-some years. November is even better as we get into the holiday mood and celebrate Thanksgiving, which is typically characterized by an early “January effect” and a broad-based stock market rally.
October is also leading up to the November 3 presidential election. The presidential debates will be in full swing in October, and both candidates will “suck up” to voters. As we’ve discussed before, this is good for both consumer and investor confidence, and, in turn, should support higher stock prices.
Aside from the upcoming presidential debates and election driving the stock market in October, we also need to remember that the third-quarter earnings announcement season will kick off during the second full week of October.
As a reminder, the second-quarter earnings season was stunning. According to FactSet, 84% of S&P 500 companies topped analysts’ earnings estimates and 65% beat revenue forecasts. It was the biggest quarter for earnings surprises since FactSet started tracking the data back in 2008. And, if the third quarter follows suit—as I expect it to—we’re going to experience wave-after-wave of positive earnings surprises again. It’s one of the reasons why I’m so bullish on the stock market right now.
Currently, FactSet is expecting the S&P 500’s third-quarter earnings to decline by an average 21.8%. Third-quarter revenue is only forecast to dip an average 3.8%, and we can thank the weak dollar for that. Remember, a weak dollar creates windfall sales for big multinationals.
My Growth Investor stocks have had their earnings forecasts revised higher by an average 25% over the past three months.
Take, Zoom Video Communications (ZM), for example. This fundamentally superior stock is up over 44% since August 31, and has stunning forecasted sales and earnings ahead.
Over the last 90 days, 24 analysts have increased their earnings estimates for Zoom Video Communications’ third quarter, which is expected to come in at $0.75 per share, or an eye-popping 738% year-over-year growth. Wall Street anticipates revenue will climb 315%, year-over-year, to $692 million.
Overall, though, my Growth Investor Buy List stocks are characterized by 45.8% average annual sales growth and 65.4% average annual earnings growth.
Clearly, my Growth Investor subscribers are “locked and loaded” for the coming earnings season!
I’ll provide more details on the third-quarter earnings season in my upcoming October Monthly Issue of Growth Investor on Friday. I also have one new buy lined up this month in the health sector, which I reveal in this Friday’s Growth Investor October Monthly Issue. In the past three months, analysts have revised their consensus earnings estimate for this company 61.8% higher. Positive revisions like this often precede future earnings surprises.
Let me say now that in the overall market, the stage has been set for a strong year-end rally. And with wave-after-wave of positive third quarter sales and earnings to look forward to, our fundamentally superior Growth Investor stocks are set to benefit.
P.S. As regular readers know, I’m only interested in the fundamentally superior growth stocks, especially since the market is about to experience a rare event we haven’t seen in decades. I call it a Foreshock. If you thought the run-up from 2009 until now was impressive, you haven’t seen anything yet.
In my special Financial Foreshock Summit, I explain exactly why. (You can watch my free briefing here.) I’ll also share where I see the best opportunity to play the growth. I’ll give you a hint: it’s not Tesla or Nikola.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owned the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Zoom Video Communications (ZM)