July 21, 2016
For those of you who are invested in the stock market, I have some bad news and some good news. The bad news is that this earnings season, the S&P 500 is headed towards its sixth consecutive quarter of sales declines, and its fifth consecutive quarter of earnings declines. Already, we've seen a number of big blue chips knocked down a peg, including Halliburton (HAL) and Netflix (NFLX).
And, with the market's 500 biggest companies forecasted to post a 5.5% drop in earnings, there will be more disappointments to come. I must also mention that typically the stronger earnings announcements are released earlier in earnings season.
The good news is that you can take steps to protect your portfolio. In many cases, there are red flags that can help you avoid the worst earnings offenders. One thing that I rely on personally is my Portfolio Grader stock screening tool. If you're not already familiar with it, Portfolio Grader rates stocks according to their Quantitative Grade and their Fundamental Grade. The Quantitative Grade measures how much money is flowing into a stock, which is a strong indicator of upside potential. The Fundamental Grade is a weighted average of eight critical fundamentals, including sales growth and earnings growth.
Portfolio Grader generates stock report cards that can help you make informed investing decisions. I use it constantly, especially before and during earnings season. For example, if you had plugged in either HAL or NFLX into Portfolio Grader, you would have seen that both stocks are C-rated holds (at best). So you would have known not to add these stocks leading up to their respective earnings reports.
Next week is going to be crunch time for earnings season, with 191 companies in the S&P 500 reporting their quarterly results. To prepare, I've compiled a list of 25 big-name blue chips that you may want to consider selling before then. Let's take a look:
|Ticker||Name||Total Grade||Quantitative Grade||Fundamental Grade||Earnings Date|
|ALXN||Alexion Pharmaceuticals, Inc.||F||F||C||28-Jul|
|BA||The Boeing Company||D||D||C||27-Jul|
|COG||Cabot Oil & Gas Corporation||D||D||D||29-Jul|
|ESRX||Express Scripts Holding Company||D||D||B||25-Jul|
|GILD||Gilead Sciences Inc.||D||D||C||25-Jul|
|HCA||HCA Holdings, Inc.||D||D||B||28-Jul|
|LYB||LyondellBasell Industries N.V.||D||D||B||29-Jul|
|MPC||Marathon Petroleum Corporation||F||F||D||28-Jul|
|NOV||National Oilwell Varco, Inc.||D||D||D||28-Jul|
|RCL||Royal Caribbean Cruises Ltd.||D||D||B||28-Jul|
|STT||State Street Corporation||D||D||C||27-Jul|
|VRTX||Vertex Pharmaceuticals Incorporated||D||F||C||27-Jul|
|WFM||Whole Foods Market, Inc.||D||D||C||27-Jul|
|XL||XL Group plc||D||D||C||27-Jul|
I'll continue to keep you briefed on the latest earnings news in this daily blog, so please stay tuned!
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