U.S quarterly reporting gets into full swing this week with 91 companies in the US Top 500 releasing Sales or Earnings updates to the market. A timely reminder then, that our Earnings Positioning screen allows you to identify those potential ‘risk’ stocks by analysing a range of multi asset factors and highlighting those exhibiting extreme market characteristics or displaying specific sentiment bias.
Lets look at a couple of example screens:-
- 11 stocks are currently technically Overbought(>70) on an RSI measure heading into numbers.
- 7 of these companies are considered ‘expensive’ versus their respective sectors in terms of valuation.
- A further 4 of these offer a poor sector relative yield (Johnson & Johnson, Intel, Union Pacific & Stryker).
- The only company to see sector beating earnings upgrades in the last month is D R Horton possibly supporting its overbought status whilst Stryker retains a comparatively high degree of short squeeze risk with nearly 9 days to cover
Perhaps the most interesting name from the screen above is Lockheed Martin. Not only is it technically overbought with a low relative yield, it has also seen an extremely unusual 5 day move in the % of free float on loan(short interest) increasing by 211% over the week, possibly indicating downside risk expectations by Hedge Funds. Interestingly other market observable’s and sentiment indicators in the Core Summary such as EPS momentum(flat) and Estimize(@$2.93 vs Wall St $2.92) suggest the broader market is expecting an inline report.
Positive risk indicators are also highlighted in the Earnings Positioning screen. For example, conversely to Lockeed, both Southwestern Energy and WW Grainger have seen a significant contraction in the short interest over the last week, with the latter displaying large short squeeze potential with nearly 15 days to cover. Additionally, Southwestern has seen analysts adjust their EPS estimates up by 42% in the last month putting in the top 10% of its sector for upgrades.
Only one stock has greater short squeeze risk than Grainger and that is Visa with over 30 days to cover.
The single stock Core Summary for Visa indicates a number of concurring factors such as strong positive technicals and EPS momentum, low sector relative valuation alongside expectations of a ‘beat’ within the Estimize comunity and the highest sell-side TIM Indicator score of 10.
Don’t be caught out over Earnings season, let OTAS bring together the most important factors and performance drivers so you never need miss a potentially stock moving trigger.