It's About to Get Real

NOTE: Investors were pretty optimistic last earnings season, and, fortunately, it looks like those good vibes will continue this time around. In this week’s Zacks Confidential , Steve asked Eric to explain how last season’s winning strategies can find stocks that beat expectations…and then rise on the news. Learn about the two most important factors in picking winners and get three recommendations by clicking: How Investors Can Be More Successful This Earnings Season
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We’re now just three days away from something that was largely considered impossible just a little more than two months ago. President-elect Donald Trump will take the oath of office on Friday and become the 45th President of the United States. The market soared for weeks after the election ended in early November, but now it’s about to become real. The bottom line is that The Donald is still a wild card, so it’s understandable that this jittery market would start inauguration week in negative territory.

The S&P was off 0.30% to 2267.9, while the Dow was down by the same percentage to 19,826.8. The NASDAQ slipped 0.63% to 5538.7. Each of these indices came off of their lows for the session. So how will the market react when President Trump is official? It’ll be an interested first 100 days.

The market also has earnings season to think about, which had a big impact on the portfolios on Tuesday. The Surprise Trader is at its busiest during earnings season, which was evidenced today when it picked up 4 names that report this week. Meanwhile, Stocks Under $ 10 added a “Trump trade” stock that should prosper on increased infrastructure spending. Finally, Black Box Trader and Zacks Short List swapped out 6 and 3 names, respectively, for their weekly adjustments. Learn about all this in the highlights section below:

Another Big Profit from Netflix

→ With earnings all set for tomorrow night, Jeremy felt it was time to sell the remaining position in Netflix (NFLX) for Zacks Counterstrike . The stock nearly hit the editor’s target of $ 136, and he doesn’t want to risk a double-digit return by holding it through an unpredictable report. Therefore, he sold it on Tuesday and banked a 16.2% profit.

Today’s Portfolio Highlights:

• You know it’s earnings season when the Surprise Trader adds four names in one shot. After these 12.5% allocations, the portfolio should be close to full. Here are some quick takes on the new additions: 

— The country’s strong economic position right now should benefit a cyclical railroad company like CSX (CSX), which hasn’t missed the Zacks Consensus Estimate in the last 10 quarters. It has an Earnings ESP of more than 2% for the report coming after the bell today. 

— There’s also profit potential in air transportation with United Continental Holdings (UAL) enjoying a robust Earnings ESP of 6.7% for today’s report after the bell. The stock has an impressive fundamental position with a Zacks VGM Score of “A”. 

— Eric’s first two picks for Surprise Trader this earnings season were from the financial sector…and the editor isn’t done with this highly-ranked space yet. He also added Charles Schwab (SCHW) on Tuesday, which is a Zacks Rank #1 (Strong Buy) stock that has beaten earnings estimates for six straight reports. It is part of a space in the top 10% of the Zacks Industry Rank and is scheduled to report tomorrow. 

— Finally, Citigroup (C) is in the top 3% of the Zacks Industry Rank AND in the number 1 ranked sector. This Zacks Rank #2 (Buy) has an Earnings ESP of close to 2% for the quarter being reported before the bell tomorrow. It has also beaten earnings estimates for seven straight quarters. 

Read the complete commentary for a lot more on these new additions, including the results for this afternoon’s reports. 

• If the new administration makes good on its promise to improve the country’s infrastructure, then that would mean big things for Manitex International (MNTX). The company makes industrial equipment for lifting, such as cranes, forklifts and boom trucks. So you can call this a Trump play. Over the past four quarters, this Zacks Rank #1 (Strong Buy) company has beaten twice, matched once and missed once. The miss came a year ago, which means MNTX should have easy comps when it reports again. Brian added it to the Zacks Under $ 10 portfolio on Tuesday. Read the complete commentary for more. 

• More than half of the Black Box Trader portfolio was replaced in this week’s adjustment…which was delayed one day due to the holiday. There were six swaps this time, as AKS, BAC, BHI, CHS, MGM and MS all left the list. The new additions replacing these names are Freeport McMoRan (FCX), CenterPoint Energy (CNP), Deutsche Bank (DB), Seagate Tech (STX), Francesca’s Holdings (FRAN) and UnitedHealth Group (UNH). Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing. 

• The Zacks Short List swapped out three names this week. The portfolio short-covered TEX, EMR and DISH. The new additions that replaced these names are CF Industries (CF), First Solar (FSLR) and Vertex Pharma (VRTX). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide. 

• “This sure feels like a stealth correction. That is a period where the conservative stock leaning S&P 500 is about breakeven while smaller, riskier stocks are getting their clocks cleaned. 

“Sometimes these periods are precursors to broader sell offs. Sometimes it is just a bit of house cleaning before the market surges higher with the smaller stocks leading the charge. 

“Which case will it be this time? 

“The answer lies in this earnings season. In particular, how optimistic companies feel about the year ahead. Let’s keep our focus on that to determine our trading strategy. We should have our answer in the next 1-2 weeks,” said Steve in Reitmeister Trading Alert . 

All the Best,
Jim Giaquinto

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