Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide. Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business
since 2008, sending it daily shortly after the market close.
The opinions expressed below are my own
Maybe next week. Maybe excitement shows up then. It didn’t show up this week and it didn’t show up today. We experienced trivial gyrations in the tape on slightly thinner capital flow (96%). Four S&P 500 stocks reported today and they mostly beat, of course. Three of the stocks dropped, one gained. It doesn’t look like beating the Street is going to be enough for individual stocks. It’s still early in the season though.
What’s interesting, and still in play, is that while single names react poorly after earnings (so far), the whole market may be fine. We witnessed something like this last season. Individual stocks didn’t routinely gain after reporting but because almost everyone beat expectations the narrative for the entire season, and market, was that earnings were great. That narrative carried a lot of water.
It’s entirely possible for that process to repeat itself this season. Let’s do an early season dive and you’ll see what I mean.
2017 Q3 Earnings season:
3% of the S&P 500 reporting (10/13 data)
Surprise vs Estimates
- Sales: +1.2% (10/13 data)
- Earnings: +5.5% (10/13 data)
Growth vs Prior (Y/Y)
- Sales: 5.2% (10/13 data)
- Earnings: 6.6% (10/13 data)
That’s good stuff! The fact that the stocks that generated these results mostly fell when they announced, is not important. The whole market looks like it’s surprising and growing nicely.
Of course, valuation isn’t part of this bullish narrative. We all know valuation matters but it hasn’t mattered for a while. Why should it start now?
Anywho, my point is that earnings results for individual names aren’t so helpful for the shareholders but could be good for all US equity owners nonetheless. Is that a paradox?