Earnings season brings about new opportunities to buy stocks that drop after they report earnings. Many stocks see exaggerated drops in their share price if a company "misses" earnings expectations by even a couple of pennies. Other times the earnings meet expectations, but if the company gives guidance that looks weak, it also often results in an exaggerated sell-off in the stock. The reason I look for these types of opportunities is because stocks that are oversold often rebound quickly, sometimes in just days and this can create quick profits for traders or solid entry points for longer-term investors. With earnings season in full swing, there are stocks getting major haircuts everyday for what might be just a short-term earnings miss, so opportunities abound. All of the stocks below recently reported earnings and/or guidance that caused the shares to drop substantially. These stocks could be solid candidates to rebound in the coming days and weeks:
Wells Fargo (WFC) shares are trading at $25.86. Wells Fargo is a major U.S. bank. The 50-day moving average is $24.63 and the 200-day moving average is $28.45. The shares have traded in a range of $22.58 to $34.25 in the past 52 weeks. Earnings estimates for WFC are $2.82 per share in 2011, and $3.32 for 2012. WFC pays a dividend of about 48 cents per share, which is equivalent to a yield of about 1.8%. This stock is trading for about 8 times earnings and close to book value, which is stated at $23.86. WFC shares dropped from about $26.50, a couple days ago when the company reported quarterly earnings that disappointed many investors. The stock has started to rebound, but I would wait for dips back to about $24.50 or less.
International Business Machines (IBM) shares are trading at $178.90. IBM provides a variety of information technology products and services. The shares have traded in a range of $136.70 to $190.53 in the past 52 weeks. The 50-day moving average is $172.23 and the 200-day moving average is $166.46. Earnings estimates for IBM are just over $13 per share in 2011 and about $14.74 for 2012. Since the shares are currently trading over the 50- and 200-day moving averages, and close to the 52-week high, I would wait for a pullback to at least around $166 before accumulating. IBM reported earnings this week which disappointed investors. That led to a drop of about 5% for IBM shares, even on a day the Dow Index was up about 180 points.
Alcoa Inc. (AA) is trading at about $10.14. Alcoa is a leading producer of aluminum products. These shares have a 52-week range of $9.55 and $18.47. The 50-day moving average is $11.14 and the 200-day moving average is $14.98, so the shares are trading well below these key support levels. Book value is stated at $13.97 per share. Earnings estimates indicate a profit of 94 cents per share for 2011 and $1.10 for 2012. AA pays a dividend of 12 cents per share, which is equivalent to a 1.2% yield. A few days ago, Alcoa reported earnings and that led to a lower stock price. Alcoa looks like a solid buy on dips below $10.
Halliburton (HAL) is trading at $35.29. HAL is one of the leading oil equipment and service companies. The shares have traded in a range of $27.21 to $57.77 in the past 52 weeks. The 50-day moving average is $38.38 and the 200-day moving average is $45.01. Earnings estimates for HAL are at $3.37 per share in 2011, and $4.47 for 2012. The book value is about $12.68. HAL pays a small dividend of 36 cents per share, which gives a yield of 1%. Just a few days ago, HAL reported earnings and the stock dropped from about $37.50 to about $34.50. The stock has rebounded slightly from recent low and it looks like a good value on any dips from here.
Apple, Inc. (AAPL) shares are trading at $422.24. Apple is a leading maker of computers and mobile devices. The 50-day moving average is $387.24 and the 200-day moving average is $357.31. Earnings estimates for AAPL are about $27.70 per share in 2011, and $32.79 for 2012. However, these estimates appear to be too low. The 52-week range is $297.76 to $424.81. Apple is a great company and will probably continue to be a solid investment for the foreseeable future. However, Apple reported earnings after the close on Tuesday, and the stock dropped in after-hours trading by about $27. Some Apple investors were expecting the company to beat the estimates, but instead the company missed by a few cents. This just gives long-term investors another buying opportunity, but I would wait a couple of days before buying. Dips below $387 would appear to be a good buying opportunity since this is right around a key support level (the 50-day moving average). If Apple hits $357, that would probably be the lowest it would go to and that would be the time to get more aggressive.
Crox, Inc. (CROX) is trading around $16.15. The 50-day moving average is $15.41 and the 200-day moving average is $16.29. These shares have traded in a 52-week range between $13.20 and $32.47, so they are very close to their 52-week low. CROX is estimated to earn about $1.38 per share in 2011 and $1.66 in 2012. Crox just announced earnings that investors viewed as being very weak in terms of guidance. The stock dropped from about $26 to about $16.15. This stock might be a good rebound candidate but I would only view it as a short-term trade and sell any rallies.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I am long AAPL.
Disclaimer: Rougemont is not a registered investment advisor and does not provide specific investment advice. This information is solely educational in nature and not intended to serve as the basis for any investment decision.