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April/May 2011 Earnings Season Report

Earnings season is a six-week period when the majority of S&P 500 quarterly corporate earnings are released to the public. Since earnings season is almost over, lets recap the stocks I played throughout the earning season.

Overall earnings beat 80 percent plus, which is outstanding. Companies have slimmed and trimmed to increase overall profit. Great earnings combined with good future expectations estimate a higher year-end than current standings. Companies are hiring, earnings are great, and growth is in the future. Now the concern is for the government and its finances.

Government deals in short-term time lines mostly. Companies forecast a five to 15 year time frame. What will taxes be two years in the future? Are oil and other commodities way over priced? Are the little Middle East oil producers really important with their smaller amounts of oil? Perhaps, the key question is whether the U.S. will default on its loan payments?

Federal and state governments are in the middle of negotiating budgets and taxes. Oil and other commodities saw a decline last week indicating the market may be over priced. If the U.S. can’t find money to begin paying loans back, we can kiss our reserve currency status goodbye.

So, why is all of this so important? We do not incur the simple exchange rate costs with buying our commodities across the world. Everyone uses, purchases, and buys based on our U.S. dollar. It saves us roughly 20 percent in the cost of practically everything. For this reason I have invested in Blue Chip stocks with an international exposure to some of their products.

Let’s see how they’re doing:


Apple Inc. (AAPL): Great earnings with great guidance, billions in reserves to help grow the company in new areas to increase revenue streams.

Boeing Co. (BA): Great earnings, with the tanker bid ensured. The dream liner is on plan to be delivered. As long as the U.S. doesn’t default, BA has billions to work with.

Baidu, Inc. (BIDU):  Once again the Chinese Google kills earnings and then gave tempered guidance. They took a killing due to profit taking. They should continue to run to the upside.

Caterpillar Inc. (CAT):  Huge growth with guidance letting us know they have a huge amount of orders as third world countries grow. Infrastructure is growing worldwide and CAT owns a big piece of it.

Deere & Company (DE):  Deere is Cat’s little brother and they go hand in hand. Earnings are in two weeks and they should report similar earnings to CAT. See the collar trade below.

Google Inc. (GOOG):  A good earnings with bad guidance has caused a 10 percent drop currently filling the gap back up.

Ford Motor Co. (F):  Ford had great earning with good guidance but they’ve fallen. I don’t have an explanation on why at this time other than the fact they didn’t announce a 13 billion dollar tax break for new plants being constructed.

NVIDIA Corporation (NVDA):  On the earnings and quantity that AAPL announced for their earnings where they should shine. Last quarter saw great earnings, great guidance, and great ratios didn’t earn the company a run up. Sentiment and market expectations can pull down even the best of companies.

SanDisk Corp. (SNDK):  Good earnings and good guidance gave them a move up until the market brought down the semiconductor sector.

Visa, Inc. (V):  Visa is our anomaly. Good profits and met earnings expectation, but bad guidance and worry about the new regulations may cut their profits in half. So up they go on even a bad day in the market.

Market sentiment is very hard if not impossible to overcome. When the market is going down, 80 percent plus of stocks are also going down. Markets don’t move straight up or down ever. We, as investors, will do the best we can to protect to the downside and make up some of the downward movement. Anything

made to the downside profits us on the way back up. It lets us sleep at night knowing we won’t lose half of the value of the portfolio over night!

OptionsANIMAL Instructor

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