First of all, great post. Your right, it made what you do much easier to understand. Pretty impressive stuff.
There is a better way to use estimate revisions, and this statement, while accurate, is misleading. You said:
********On the SI thread Strictly: Drilling and oil-field service there has been some discussion of using analysts estimates changes as a factor in the process. This chart demonstrates that although the stock has sold off, the analyst trend in earnings is not varying and is still on a generally upward path. I'm sure this is why Bigdog wants to slap people silly for selling options on CDG at the present time. ;-)*******
I'll use both of your examples, CDG & TMAR. And let's assume that you are correct when you point out that the forward year estimates have been rising on each of these.
There are 8 analysts who have provided an estimate for CDG for this FY. All 8 have revised their estimate up, 8 up, 0 down, for this YEAR. So it looks like you are right. Revisions up, stock price down? Nope. Your looking at the wrong numbers. Instead, you should look at the next Q to be reported. For CDG, 6 analysts have published an Q estimate, none have been revised up, but 3 have come down. 0 up, 3 down? Bad.
TMAR for the year 10 analysts, 3 up, 7 down. For this Q, 10 estimates, 0 up, 6 down. Very Bad.
There are all kinds of reasons why this contradiction happens. Pressure from investment bankers. Pressure from the companies. Mostly it's because annual estimates are almost always too optimistic, especially early in the year. Analysts bring them back in line, quarter by quarter. It's a bit of a game.
I'm sure you realize the obvious factor moving the estimates up on your chart is the time period covered. Each Q, you should get a little spike up, as you throw out the last Q and add a typically inflated Q for a year from now. Remember that in these two cases, CDG & TMAR, no one is saying earnings are falling, only that they are not rising as fast as they earlier predicted.
Anyway, you should watch the Q revision numbers. You will not often go wrong with them. Once you have done some strong FA, revisions momentum can be a useful tool. It won't get you in exactly at the bottom, or out exactly at the top. But it will get you close. BTW, after watching this carefully for years, it tends to be a better buying than selling guide.
bobster
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