Four Tips for Buying Stocks in Bad Times

November 13, 2008

Beating Estimates Means Outperforming Other Stocks

My final tip to spot winning stocks is to find companies that are having their earnings estimates revised higher by Wall Street analysts. Beating earnings expectations is great, but we also want to hear a company say that future earnings are going to be better than expected. Union Pacific (UNP), the railroad, is a good case in point. Business is booming and the company recently reported very strong earnings for the third-quarter of $1.38 a share, which beat the Street’s consensus by eight cents a share.
 
But that’s not all. Union Pacific is so confident of its business right now that it said fourth-quarter earnings will range between $1.25 and $1.35 per share. The Street was expecting just $1.22 a share. Union Pacific also raised its forecast for the entire year to a range of $4.50 to $4.60 per share, compared with the Street’s forecast of $4.37 per share. This impressed me a lot. Plus, earnings revisions almost always lead to future earnings surprises. Union Pacific is currently trading at 11.5 times next year’s earnings, but given the earnings revisions, I think the stock is probably going for less than 10 times what it will make next year. Spotting earnings revisions is a great way to uncover value stocks before the crowd does.

Now you may be curious how you can find companies that rate well on any of these four variables. Don’t worry. You don’t have to wade through piles of financial forms. I’ve already done the hard work for you. Just visit my PortfolioGrader Pro stock-rating website, enter in any stock symbol and press “Submit.” Instantly, you’ll see my grades for any stock across eight different fundamental variables, plus an overall Fundamental Grade, an overall Quantitative Grade and my Total Stock Grade. My advice is to sell any stock that has a Total Stock Grade of D or F.

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That’s all for this week. I’ll have the next issue of What’s Working on Wall Street Now on Thursday, November 20.

Sincerely,

Louis Navellier

P.S. I'm currently finishing up the December issue of Blue Chip Growth. In it, I outline our strategy for 2009. It's an issue you don't want to miss. Sign up today!