Stone-Cold Earnings Lock of the Week
Strong earnings from Apple (AAPL) helped propel the market higher last week. The technology king continues to mint profits with no end in sight. Given the relatively low valuation of that stock, it is no surprise shares were significantly higher on the news.
Below the surface of that good news, individual stock reports are not as bright. My stone-cold lock of last week, Buffalo Wild Wings (BWLD), released earnings that were only so-so. The company slightly beat the earnings number, but missed on revenues.
Shares fell immediately in the hour of trading remaining after the report was released. The stone-cold lock recommendation of a Buffalo Wild Wings May expiration put exploded more than 30%. Not bad for but an hour or two of holding the position.
In full disclosure, Buffalo Wild Wings recovered those losses in the next trading day, but when trading earnings we are not concerned about the long term. These recommendations are for the first moments of trading after news is reported. Get in and get out.
With the gains in stocks, the downside risk for individual names remains high. The trigger for a potential collapse in share value is likely to be earnings. If expectations are not met, the market typically adjusts its future outlook and valuation of a particular name. The corrections can be fast and furious creating a wonderful trading opportunity for those looking exclusively at earnings reports.
Where will we find the winners this week? Given that we are in the midst of earnings season we won’t have to look far.
Here are five names reporting this week, including my stone-cold lock of the week earnings trade:
- Long and Short Ideas
- Market Commentary
- Top Stocks
- Wall Street Follies