Blow-Out Earnings For All Our Stocks, What Is The Secret? (Avg Earnings Beat Of 161%)
Summary
- Earnings reported by companies over the past weeks have never been so different compared to annalist consensus as the impact of Covid-19 is almost impossible to predict.
- This creates both opportunities and risks. We expect that this uncertainty will remain significant in the foreseeing future. How can you turn these risks into opportunities?
- Empirical evidence has proven that insiders are able to predict earnings very well. We will discuss this theory in this blog post.
- Indeed, we found that our portfolio stocks that insiders purchased on average beat consensus by 161% last quarter, a phenomenal performance.
- Start benefiting from this proven strategy today as well! Try out a 14-day FREE trial at Insider Opportunities and receive a 20% discount if you like it. This offer expires TODAY!
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Earnings season is running to its end and will be remembered as one of the most volatile quarters ever.
The impact of Covid-19 on businesses is very hard to predict. As such, annalist estimates turned into "guesstimates" and companies either beat or missed by a wide margin. This led to significant stock price increases/decreases.
For example, Splunk (SPLK) lost a staggering 23.5% of its value last week on an 11% revenue decline and EPS miss of $0.15/share. Fastly (FSLY) tumbled 30% on a strong guidance miss. It looks like not all tech stocks are indestructible after all.
We strongly believe that this volatility will remain for the foreseeing future. Some tech stocks will not benefit that much from Covid-19 as the market is pricing in right now, while some value stocks will do even worse than the market is fearing as they become irrelevant in the new economy.
This creates significant risks and uncertainties for investors today. But we operate with a strategy which reduces these risks significantly...
Our strategy to be confident in future earnings
At Insider Opportunities, we exclusively track stocks that insiders purchased via our daily Insiders at Breakfast article.
Insiders are the CEOs, CFOs, board members... which are 24/7 busy with the financials and operations of their firm. If they see that their firm is doing very well, while their stock isn't, they buy shares of their own company to make a profit.
This is not only a theoretical implication, it is also empirically proven by researchers
Piotroski, J. D., & Roulstone, D. T. (2004) that high insider purchasing activity is correlated with high future returns on assets ("ROA") (a proxy for earnings).As such, by following insider purchases one can be very confident in future earnings releases and stock performances. This is extremely valuable today.
Earnings release of our stocks were mind-blowing
As we only pick out stocks which insiders purchased heavily with out proven algorithm, we were very confident that this would be a strong earnings season for our stocks.
Last week, we discussed earnings releases of two stocks in our Insider Opportunities portfolio.
Korn Fery (KFY) was included after CEO Burnison and CFO Rozek had purchased significant amount of shares. After an in depth review, we came to the conclusion that this leading HR services company would bounce back significantly once earnings improve and advised members to buy shares.
Its earnings, which we discussed in a separate article, were mind-blowing. While analysts only expected EPS of $0.05 due to the impact of the pandemic, KFY was able to report $0.54 in earnings, a beat of 980%! The earnings and management statements during the conference call were so strong that we needed to increase our price target from $49.4 to $58.5. Despite the 45.5% gain so far, we advise our members to keep holding those shares for more upside.
HP Inc (HPQ), the leading printer and PC company, saw a similar story. The stock got beaten up by the market at the beginning of 2020 and insiders (CEO and director) purchased for more than $1 mln worth of shares as they expected a strong improvement of earnings. We advised members to follow these purchases as well, leading to strong gains.
HP reported very strong Q3 numbers in November, reporting EPS of $0.62, beating consensus by $0.10 or 19.2%.
We raised our price target in our article for members to $33.50 and still see a lot of upside despite the 46.3% gain so far.
I was intrigued by their earnings beats and decided to make on overview on how the rest of our portfolio's earnings were compared to analyst consensus. The results are astonishing...
As you can see below, our stocks which have reported earnings so far on average beat consensus by 161%!
That's one of our greatest strengths. In these uncertain times, our members can be confident in the following our undervalued stock recommendations based on our proven insider strategy.
| Name | EPS | Annual growth | Consensus beat | Our return |
| Korn Ferry | $0.54 | -35% | +980% | +45.5% |
| HP Inc | $0.62 | +3% | +19.2% | +46.3% |
| Position 3 | $0.63 | +9% | +10.7% | +4.5% |
| Position 4 | $1.34 | -25% | +30% | +113% |
| Position 5 | $1.18 | +80% | +45.8% | +11.7% |
| Position 6 | $0.91 | +21% | +99% | +30.6% |
| Position 7 | $0.53 | +23% | +60% | +35.5% |
| Position 8 | $0.52 | +136% | +48.6% | -17.4% |
| Position 9 | $0.35 | -35% | +94.4% | 26.36% |
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Analyst's Disclosure: I am/we are long KFY.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.