5 Stocks to Buy Before Big Earnings Surprises

TL;DR

Volatility around earnings announcements can greatly impact stock market returns. Q3 earnings are expected to decline, but there are opportunities to find stocks that may surprise with positive earnings. Key sectors to watch are financials, healthcare, and energy.

Transcript

hey bowtie nation joseph hogue here with let's talk money and one of my favorite trading strategies in today's video research has proven that volatility increases around earnings announcements and up to half the year's total stock market returns are produced around the handful of months the companies are reporting their profits that's during normal... Read More

Key Insights

• 📢 Volatility around earnings announcements impacts stock market returns significantly.
• 😮 Q3 earnings are expected to decline, but there are opportunities for positive surprises.
• 👀 Financials, healthcare, and energy are sectors to watch for potential stock picks.
• ❓ Stocks in the financials sector, such as Voya Financial and Huntington Bank Shares, show promise.
• 🙃 CVS Health is a potential pick in the healthcare sector, with upside potential from COVID-19 vaccine distribution.
• 💪 Diamondback Energy and EOG Resources are energy stocks to consider, with strong cost-cutting measures and potential for a market rebound.
• ❓ Dividend opportunities exist in both the financials and energy sectors.

Questions & Answers

Q: Why is volatility around earnings announcements important?

Volatility around earnings announcements is crucial because it can greatly impact stock market returns. During normal years, a significant portion of the year's total market returns are produced around the months when companies report their profits.

Q: How did the market perform after Q2 earnings?

After Q2 earnings, the S&P 500 and NASDAQ experienced gains, with the S&P 500 up 15% and the NASDAQ up 20%. Overall, 84% of companies in the S&P 500 beat earnings expectations, and some sectors outperformed, such as IT, materials, healthcare, and industrials.

Q: What sectors should investors focus on for potential positive surprises in Q3 earnings?

The financials, healthcare, and energy sectors are worth watching for potential positive surprises in Q3 earnings. These sectors have faced challenges this year but offer opportunities for value stocks that may outperform expectations.

Q: What are two stocks to watch in the financials sector?

Two stocks to watch in the financials sector are Voya Financial (ticker: VOYA) and Huntington Bank Shares (ticker: HBAN). Voya Financial, a services company, has faced challenges but is expected to report positive earnings. Huntington Bank Shares, a regional bank, offers a dividend yield and has improved profitability through acquisitions.

Q: Which stock shows promise in the healthcare sector?

CVS Health (ticker: CVS) is a healthcare stock to consider. The company has a history of beating expectations and offers a cheap valuation. The potential distribution of the COVID-19 vaccine could boost CVS Health's sales, providing upside potential.

Q: How has the energy sector been impacted by the current environment?

The energy sector has faced challenges due to weak demand. However, companies like Diamondback Energy (ticker: FANG) and EOG Resources (ticker: EOG) have remained profitable and show potential for positive earnings surprises. Diamondback Energy has aggressively cut costs, while EOG Resources has premium assets in shale oil that may see increased value with a market rebound.

Q: Are there any dividend opportunities in the financials and energy sectors?

Yes, both Huntington Bank Shares and Diamondback Energy offer dividend yields. Huntington Bank Shares has a dividend yield of 6.3%, while Diamondback Energy has a dividend yield of 5%. These dividend opportunities can provide additional returns for investors.

Q: What are the analysts' price targets for the featured stocks?

Analysts have price targets ranging from $10 to $12 for Huntington Bank Shares, $72 to $104 for CVS Health, $44 to $72 for Diamondback Energy, and $52 to $85 for EOG Resources. These price targets indicate potential upside from the current stock prices.

Summary & Key Takeaways

• The market saw a significant rebound after Q2 earnings, with the S&P 500 and NASDAQ experiencing gains. However, economic data has stalled since then, and uncertainty remains for Q3 earnings.

• Companies have pulled guidance, making it difficult to predict earnings. In Q2, some sectors, such as IT, materials, healthcare, and industrials, performed better than others, while the real estate and energy sectors saw negative surprises.

• Despite the overall decline in earnings expected for Q3, there are opportunities to find stocks with positive surprises. By analyzing sector valuations, value stocks can be identified. The financials, healthcare, and energy sectors are worth exploring.

• In the financials sector, Voya Financial and Huntington Bank Shares are two stocks to watch. In healthcare, CVS Health is a potential pick, and in the energy sector, Diamondback Energy and EOG Resources show promise.