Four times a year, investors are handed thousands of opportunities to book life-changing profits on stocks.
The kind of money that sends kids to college, buys a boat or rapidly accelerates voluntary retirement.
But in order to cash in on these plays, you have to know where to look. And how to play them for maximum profits.
What on Earth can make this a reality?
Earnings season.
Free Reports:
Every publicly traded company in the U.S. is required to report quarterly earnings every three months.
And the gains that follow a company’s stellar report come quick.
Today, senior analyst Jonathan Rodriguez will show you the best places to look for the season’s outperformers.
Ahead of the tape,
Louis Basenese
Chief Investment Strategist, Wall Street Daily
To be sure, stock valuations are elevated — especially after the post-election “melt-up.” And earnings growth has only just recovered from a painful “recession.”
This has many investors fearing the worst for stocks.
The S&P 500 currently trades around 19 times forward earnings, which is about 35% higher than its 10-year average (around 14).
The index’s earnings premium has drawn the ire of financial talking heads.
But the economy is chugging along. And if firms continue to deliver the profits — and interest rates remain low — this rally has room to run.
According to Thomson Reuters, third-quarter S&P 500 earnings are expected to rise 8%, and revenue by 4.6%.
Not bad…
But what’s more notable this quarter is that — yet again — technology leads the market’s forecast growth by sector.
Reuters expects tech earnings to rise by a whopping 11.2%.
That’s nearly four percentage points higher than the second-biggest projected sector growth (financials at 7.6%).
You might think tech stocks should be avoided after their tumble late last month, but that would be a big mistake.
Profit taking in tech names was to be expected following the sector’s dramatic rise in the first half of the year.
XLK, the exchange-traded fund that tracks large-cap tech stocks, rose 19% through early June — more than twice the gain of the broader market.
But here’s the thing…
This could turn out to be a phenomenal quarter for the sector. So the recent dip makes for a compelling buying opportunity.
And I’ve got a way for you to play one of America’s biggest tech companies ahead of earnings — for pennies on the dollar…
As the world’s biggest PC maker, Microsoft Corp. (MSFT) needs little introduction.
After losing major market share in the computing market to Apple iPad users, Microsoft has rebounded in the last three years — launching the tablet computer Surface Pro and its wildly popular Azure enterprise cloud services.
In the last two years, the $540 billion company has beaten analyst estimates for earnings in seven of the last eight quarters.
And on a GAAP basis, Wall Street expects the company to post a whopping 154% increase in fiscal fourth-quarter earnings.
Better still, Microsoft trades at 20 times forward earnings — just slightly above the S&P’s multiple of 19.7.
Of course, investors could simply buy shares of Microsoft ahead of earnings to take advantage of the pop.
But thanks to the dip in tech, options on the stock have dropped in price significantly.
The $75.00 calls expiring on Aug. 18 currently trade for about $1.08. And these options will break even with a move in the underlying shares to $76.05.
The options double in value once shares hit $76.75 — a mere 5% rise from where the stock trades presently.
Best of all, if earnings don’t play out to the upside… your downside is limited to the amount you spent on the options.
That’s what I call winning.
On the hunt,
Jonathan Rodriguez
Senior Analyst, Wall Street Daily
The post Legal Mandate Sparks 4X Profit Opportunity appeared first on Wall Street Daily.