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Earnings season may be winding to a close, but it isn't dead yet. In fact, there are 20 S&P 500 companies on the docket this week.
One sector seeing a considerable amount of activity this week is retail, with 15 (about 20%) of the SPDR S&P Retail Index (NYSE Arca: XRT) reporting.
Although several big names have already had their turn in the earnings confessional – including Walmart Inc. (NYSE: WMT), Macy's Inc. (NYSE: M), and Home Depot Inc. (NYSE: HD) – this week has a respectable lineup with the likes of Kohl's Corp. (NYSE: KSS), Lowe's Companies Inc. (NYSE: LOW), and Target Corp. (NYSE: TGT).
Earnings can be a tricky trade, as there are many moving parts.
Of course, there are earnings and revenue and their accompanying analyst expectations. Then there's the guidance that some companies choose to provide.
And many companies have distinct metrics that grab the Street's attention, such as specific product sales (e.g., iPhones), subscriber growth for cell providers, or same-store sales in the retail space.
Beyond that, of course, is how the market reacts to all this information. That can be the trickiest part of all, as results may beat expectations but still not live up to investor expectations.
We often see this for stocks that have run up into earnings, only to fall back on a solid report that failed to beat estimates by a wide enough margin.
While I usually trade stocks before earnings, I also like the post-earnings play. By taking the uncertainty of earnings and the subsequent reaction out of play, I can rely on my tried and true indicators that underlie my Best in Breed (BIB) methodology.
With that in mind, my BIB model identified two stocks that should outperform the broader retail sector over the next month.
One is a well-known name that just reported this morning. The other you may not be as familiar with, though it is a no less bullish play than the first stock.
Let's take a look…
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.