Navellier Growth: your source for market-beating growth stocks

Fourth-quarter earnings season is finally here! This is when companies have to declare how much money they made, or in many cases, how much money they lost.

I like to say that earnings season is Judgment Day on Wall Street, and stock traders can be pretty unsparing in their judgments. If a company beats the consensus earnings estimate of Wall Street analysts, the stock can soar 10%, 20% or more in a single day. But if results fall short, then the stock can get crushed under a mountain of sell orders.

On Tuesday, KB Home (KBH) reported that it lost $9.99 a share. That's tough to do when you're only a $20 stock. Or rather, KBH used to be a $20 stock. At one point yesterday, the shares got down to $15.76.  That's how brutal traders can be. Last January KB Home was going for over $50 a share.

Always Remember, Stocks Follow Earnings

The heart of my investing strategy is to find those stocks that beat earnings expectations. Unlike Jim Cramer, my goal isn't to track the indexes, it's to cream them—and I've been doing it for nearly 30 years.

I'll give you a perfect example. Humana (HUM) is one of my favorite stocks in my Quantum Growth trading service. I currently have HUM rated as my #2 buy. (To see my #1 buy, a Brazilian stock with an 8 P/E Ratio, sign up now.) Humana just reaffirmed their profit guidance for 2008. This is a big deal since so many other companies have been cutting back on their forecasts. Traders have been snatching up shares, and Humana's stock is already up 14% this year.

Earnings analysis is at the core of my investing philosophy, which I laid out in my recent book, The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing. My team of analysts and I look at thousands of stocks and zero in on the ones that have the most promising earnings.  Of our eight-variable formula, three are dedicated to earnings; earnings growth, earnings momentum and earnings surprises.

Give Your Portfolio a Free Checkup

The first thing you need to do to prepare for earnings season is to give your portfolio a free checkup. Visit my PortfolioGrader Pro website, which is free for all users. I encourage you to bookmark the site and visit as often as you'd like.

At PortfolioGrader Pro, you can see my Buy-Hold-Sell ratings on over 5,000 stocks. The ratings are based on my eight-factor model. Just enter in a ticker symbol, or more than one as long as they're separated by spaces, and click on the Submit button.

The database will instantly give each stock a letter grade, from "A - Strong Buy" to "F – Strong Sell." Not only that, but you can see letter grades and each component that goes into the final grade. So you not only see what a stock's rating is, you can see why. I strongly encourage you to sell any stock that's rated D or F.

My PortfolioGrader Pro has amassed an impressive track record. Over the last 10 years, stocks rated as A have returned over 1,368%, while the D and F stocks both badly lagged the rest of the market.

Do your portfolio a favor and give it a checkup today!

Your Earnings Season Calendar

Here's a look at a few companies that are set to report over the coming days. I expect that many banks will have a lousy earnings season. In fact, I wouldn't be surprised to see Ben Bernanke jump in and cut rates before the Fed meets again at the end of the month.

Company	Earnings Date	EPS Estimate	My Rating
Shaw Communications (SJR)	January 11	$0.25	A
Infosys Technologies (INFY)	January 11	$0.51	C
Genentech (DNA)	January 14	$0.67	D
M&T Bank (MTB)	January 14	$1.68	F
California Pizza Kitchen (CPKI)	January 15	$0.23	D
Intel (INTC)	January 15	$0.40	B
U.S. Bancorp (USB)	January 15	$0.59	D
J.P. Morgan Chase (JPM)	January 16	$0.94	C
Knight Capital Group (NITE)	January 16	$0.28	D

 

Wall Street thinks M&T Bank (MTB) will earn $1.68 a share. That may sound great at first, but consider that only a few weeks ago some on the Street were talking about $2 a share. That's how much things can change on Wall Street.

Without a doubt, my favorite of the group is Shaw Communications (SJR), the Canadian communications powerhouse. Last quarter, Shaw flattened Wall Street's forecast, earning 29 cents a share, nine cents more than expected. I wouldn't be surprised to see a similar performance tomorrow.

In my Blue Chip Growth Letter, I have Shaw rated as a strong buy up to $26 a share. If you subscribe now, you can see the rest of my A-rated stocks, complete with my market analysis and buy-below prices. I've often felt that Blue Chip is a great newsletter for those investors who are new to investing or who don't have huge portfolios to play around with.

You can sign up now for one year of Blue Chip Growth for just $149. That's less than $3 a week for a service that has tripled the market for a decade! Also, you can cancel at any time within the first six months and get all your money back. That's how strongly I feel about my service.

That's all the news I have for you this week. Be sure to visit PortfolioGrader Pro to see how your stocks rate. Earnings reports will kick into overdrive next week, so be prepared for a lot of action. Watch shares of SJR tomorrow—a rally could be in the works. Plus, don't be surprised if Ben Bernanke gives us a rate cut before the next Fed meeting.

I'll have more for you in next week's edition of "What Working on Wall Street Now."

Sincerely,

Louis Navellier