The Right Stocks for Upcoming Earnings Season

It’s that time of year again and I couldn’t be more bullish.

The markets dipped Friday following the news that President Trump, the First Lady and other White House staff contracted COVID-19. I hope they all make a speedy and full recovery soon and it’s heartening to know that they’ll get the very best in medical care.

In the meantime, I don’t think there’s much to worry about in terms of the market’s response.

That’s because third-quarter announcement season kicks off during the second full week of October and it is going to be absolutely stunning.

The U.S. stock market has carried out an historic comeback not seen since 2009 with two consecutive quarters of gains that many would not have dreamt of back in March, when the pandemic and the lock-downs started taking hold.

As a reminder, the second-quarter earnings season was impressive. 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.

Volatility hit the market in September, but the S&P 500 still gained 8.5% during the third quarter that ended Sept. 30 while the Dow rose 7.6%. The technology-centric Nasdaq climbed 11% in the third quarter and has increased 45% in the past six months, posting the index’s biggest two-quarter gain since 2000.

If the third quarter earnings reports follow suit — as I expect they will — we’re going to experience wave after wave of positive earnings surprises.

Of the 67 companies that have issued earnings guidance for the third quarter, only 22 have issued negative guidance. The number issuing positive guidance, on the other hand, is on track to tie with the second quarter of 2010 and 2018 as the second highest number of S&P 500 companies issuing positive earnings guidance since FactSet started tracking the measure in 2006.

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.

I should add that the analyst community has aggressively revised their earnings forecasts over the past three months —and the majority of these revisions were to the upside. This is the first time that analysts on average have increased their estimates since the second quarter of 2018. Estimates are still cautious, which is setting the stage for more positive earnings surprises.

Even better, my Breakthrough Stocks have had their earnings forecasts revised higher by an average 39% over the past three months. Overall, my Breakthrough Stocks Buy List are characterized by 39.7% average annual sales growth and 325.1% average annual earnings growth.

In other words, my Moneyball for Stocks recommendation system’s relentless focus on spotting companies with superior fundamentals has been right on target.

My system analyzes roughly 5,000 stocks, grades them according to eight specific fundamental factors, and waits for the right signal and time to buy.

You can get a rundown of how it works by watching my recent Moneyball Multiplier Challenge. It’s one of the rare times I’ll actually talk more in-depth about the importance of fundamentals during my interview. (That’s something I rarely do outside of my paid services!)

And, if you choose to join me at Breakthrough Stocks after, you’ll receive my exclusive special report, My Top 3 High-Flying Moneyball Stocks Poised to Skyrocket by 1,000% or More at no extra cost.

In this report, I recommend three fundamentally superior small-cap stocks in today’s hottest sectors flashing my Moneyball “Buy Signal.”

One is a leading provider of high-precision 3D sensors that has facilities in Asia, Europe and North America and is a player in the move to 5G networks taking place across the globe. By 2025, about 45% of data traffic across the internet is expected to be on 5G networks, which offers speeds 10 to 100 times faster than the current 4G networks.

The stock is up over 156% since its most recent low in the height of pandemic market jitters on March 19.

But this stock is just getting started as it prepares to report third-quarter sales and earnings in a little over three weeks from today. Wall Street expects its sales will jump 62.2%, year-over-year.

The time to get in is now, before the company releases its latest financials and it really starts firing on all cylinders.

You can watch the recording of Wednesday’s Moneyball Multiplier Challenge to find out all the details of my “Moneyball” system, and get the full details on the three stocks in my report by clicking here.

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