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OklaBoston (67.14)

A warning concerning earnings surprises

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May 24, 2010 – Comments (2)

 Last June, if memory serves, I let myself become overly fond of earnings surprises as a way of making picks here at Motley Fool. Over the next 6 months my score here fell through the figurative floor, going all the way down to -3500. That's MINUS 3500. 

 In December of last year I finally decided to quit paying so much attention to that particular factor, took the website which had sold me on it off my "bookmarks" list, and ended a lot of the picks I had made in that period. Since February,  my score here, while still a neative number, has been making new 6-month highs 2-3 times a week. 

 So don't make the mistake I did and am currently regretting. Pay more attention too insider ownership,  book value, etc. I believe you will be glad you did in a few weeks or months.

2 Comments – Post Your Own

#1) On May 24, 2010 at 12:29 PM, dragonLZ (99.34) wrote:

And you think your score going up when the market is going down, and going down when market was going up from July-Dec, has nothing to do with your picks being bearish picks with a lot of red thumbs...? 

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#2) On May 24, 2010 at 1:41 PM, OklaBoston (67.14) wrote:

Let's put it this way. I have been skeptical about newly-public stocks since long before I became familiar with the website no longer on my bookmarks list. Said website seldom recommends IPOs, which is one of the things that attracted me to it.

It also alleges that stocks on a list it maintains are more likely than most to have poisitive earnings surprises in upcoming quarters. Making "Outperform" picks on stocks from that list was, as nearly as I can tell, what dragged my score down so low. 

These days my "outperform" picks will usually be on stocks that the "Major Holders" page at http://www.finance.yahoo.com tells me have 20% or higher insider ownership. Most of my "Underperform" picks will be on stocks which that page says have insider ownership of less than half that. Stocks wih insider owership between 10% and 20% I will usually not make picks on either way.  I don't want to become too rigid about following the above rules, but for the time being will follow them more often than not.

 

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