Earnings season has kicked off, and we're already seeing some surprises out there. But, I have to warn you to be very, very careful with what you're seeing out there, because a lot of numbers that look good on the surface don't look so good when you delve a little deeper. This is especially going to be true of banks, for whom all the problems of the most recent banking crisis have not gone away.
First and foremost, analyst projections for earnings have been lowered for several sectors across the board. So while you might see an uptick in earnings numbers beating those estimates, you have to remember that the hurdle those companies had to overcome is lower than it was last quarter.
With banks in specific, we're still dealing with a high interest rate environment that's creating higher funding costs, and they're still going to have to reconcile depreciating values on their loan books, especially if they've got assets like commercial real estate in their portfolios.
And those issues are starting to show up in the numbers if you dig a little deeper. That's especially the case with the bank stock I've picked out for this week's Take It to the Bank recommendation, which soared 13% as a result of short-covering after beating EPS estimates and showing some improvements to the total value of their assets under management.
Look past the surface, though, and everything's far from wine and roses, which tells me there's a much smarter way to make money by "fading" this stock and taking profits when that gap up fills back in.
Let me show you exactly what to do. It's all in the video below:
We'll be taking a deeper look at the top moving stocks tomorrow, and I'll have more on who the real earnings winners and losers are. Keep an eye on your inboxes until then.
The post The Smarter Way to Play This Misleading Earnings Surprise appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.