2013 was a year marked by many big winners in the stock market and relatively few losers. Across the year the S&P 500 index is up over 30%. Which high fliers from the past year have enough wind in their sails to keep up the momentum going into the new year?
Fundamentals are the one of most highly correlated factors to stock performance. Ultimately the value of any company is a function of how much money it makes now and how much investors expect it to make in the future. At Estimize we crowd source quarterly earnings estimates from 3400 contributing analysts including hedge funds, asset managers, independent research shops, industry experts, students, and non professionals. By tapping into a wider distribution of contributors we have created a bigger data set that is more accurate than Wall Street 65% of the time. Here are our top 5 performing stocks of the year that hedge funds expect to go higher in 2014.
1. Ford (NYSE:F)
Year-to-date Ford stock is up an impressive 17.88%. The American automaker's profit represented by the green line in the top graph has beaten the gray Wall Street consensus 7 of the past 8 quarters and has exceeded on revenue all 8 times. As seen in the top graph there is a very large differential between the Wall Street consensus and the Estimize consensus for the current financial quarter. The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Our quantitative research has shown that when the Estimize consensus is higher than Wall Street's the company's stock will outperform the market more often than not going into the report.
2. Herbalife (NYSE:HLF)
We thank Herbalife this year for being the topic of the most entertaining segment in the history of CNBC. Afterall it's not everyday we get 2 billionaire hedge fund managers hurling insults at each other on live television. The argument began as Bill Ackman laid forth his argument that multi-level marketing company Herbalife is an illegal pyramid scheme, investor Carl Icahn who owned shares of the company was furious. Whether Herbalife is a scam or not, the company is making tons of money and growing rapidly. Over the past 2 years the company has increased its quarterly revenue by $350million or roughly 40%. All signs on our website point to Herbalife continuing to pump out big numbers and keeping shareholders happy.
LinkedIn is another company that has experienced very steady revenue growth over the past 2 years. We have also seen better profit numbers than Wall Street expected for 7 of the past 8 quarters. The Estimize consensus is expecting LinkedIn to beat Wall Street on profit again in February to make it 8 out of 9 times.
Twitter has been one of the most talked about stocks of the season since its IPO in November. The social media company's stock began trading at $35 a share and has gone crazy since. Last week TWTR toppled the $70 mark accomplishing a 100% gain in less than 2 months, but over the past 2 trading days it has pulled back sharply on concerns of overvaluation. We have seen over the past 2 years Wall Street has consistently underestimated the ability of social media companies to monetize. The Estimize consensus which has been much more accurate in forecasting social media earnings is expecting revenue to grow at a faster rate than Wall Street and likewise the expected profit is higher too. These high expectations from investors and analysts could help to explain some of the buying frenzy that has been occurring recently.
5. Yahoo (NASDAQ:YHOO)
Finally we round out our list with Yahoo. Yahoo is another internet company that has outperformed Wall Street earnings expectations in each quarter over the past 2 years. Since Marissa Mayer took over as CEO in July 2012 the stock is up over 150%. Mayer has implemented a strategy that is focusing on creating products that users will "touch every day". There is a large differential between the Wall Street consensus and the Estimize forecast for the current quarter. Our contributing analysts are predicting that Yahoo stock will be something that investors want to get their hands on in 2014.
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