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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: epicure who wrote (14566)	9/11/1998 10:33:00 PM
From: Jenna	Read Replies (3) \| Respond to of 120523

Negative Earnings Preannouncements and How They are Factored in On the Day of the Report. I've been working on the Market Gems newsletter this evening and I've come across something I've mentioned before but have seen more and more of lately. I promised subscribers to include the bottom 5-10% of worst earners from last quarter and the ones that have already announced shortfalls. Preannouncements we all know are responsible for 30-50% haircuts in the stocks. The reason that companies pre-report shortfalls is not our subject but it's because the SEC likes a general shortfall announcement before it reaches only the select few that can act on it. They prefer a public news release. It has to do with equal opportunity disclosure. For our purposes I was trying to figure out the following: What happens to companies that preannounce bad news? Do these companies fall two times, once at the preannouncment and again at the actual report? Well yes, it sometimes happens. More so, though its the companies that don't preannounce and just don't meet estimates that suffer the most. So what happens with companies that preannounce? Not what everyone thinks. I've tracked about a half dozen companies in the last few weeks that have pre-reported and have noticed the low prices are already factored into the stock at the time of the actual report. Paradoxically, some stocks actually rise either a week or few days prior to the actual announcement and rise following an announcement of disappointing earnings. I've checked some out this evening and a number of them have risen nicely today. So when I publish the best and worst performers in the newsletter on Sunday, take into consideration that although some of these stocks have decreased earnings expectations, they are already close their 52 week lows anyhow and their prices will actually increase in the day/days before their report. Another thing I noticed is that one problem I've always had in selecting which earnings plays I choose and which I drop is worrying about companies being overbought at the time it reports. No such problems here.. Most of our stocks are comfortably quite far from being overbought and could provide really interesting opportunities when they report. The reverse is not true however.. Meaning that if a company pre-reports it is 'comfortable' with expectations, the stock rises on the news. When the actual news comes out, the stock rises again. So the two stage rise is when the report is good and not necessarily a two stage decline when the report is bad. This is important for properly understanding the 'earnings plays' this quarter. In short, the opportunities for stock advancement is probably better than they have been in a long time for our plays. It promises to be a very , very interesting 6 weeks. And as usual, I'll be following it every step of the way with you. It is very important to follow up your picks intraday and try to call them when they are viable. It was a great week for shorts, puts and photo finishes with our index puts/calls, gold, oil whatever.. On good days we have to choose those stocks that give you the most bang for your buck, and we have done so since August 19, when the correction really got under way!