Individual stocks on February 21, 2018: strategy


I stated that even a simple strategy can be used to successfully trade individual stocks over the long run. Here are the simple strategy’s BUY and SELL signals in action.
The simple strategy says that in a bull market

  1. You should only go long stocks with above average earnings growth. The S&P 500’s projected earnings growth is 15.3% in 2018.
  2. You should only go long stocks that are above their 50 daily moving averages (CLOSE). This is essentially a momentum play for trend followers.

We’re looking at the following stocks today:

  1. Microsoft
  2. Berkshire Hathaway
  3. Exxon Mobil
  4. Johnson & Johnson
  5. Facebook

Microsoft

Microsoft is expected to see an earnings increase of 10% in 2018. This is less than the S&P’s forecasted earnings growth of 15% in 2018.
Microsoft is above its 50 sma. But based on the simple strategy, you shouldn’t go long Microsoft because its earnings growth is subpar.

Berkshire Hathaway

Berkshire is expected to see an earnings decrease of -8.7% in 2018. This is much less than the S&P’s forecasted earnings growth of 15% in 2018.
Berkshire is below its 50 sma. Its earnings growth is also subpar. Based on the simple strategy, you shouldn’t go long Berkshire Hathaway.

Exxon Mobil

Exxon is expected to see an earnings increase of 35% in 2018. This is much more than the S&P’s forecasted earnings growth of 15% in 2018.
Exxon Mobil’s earnings growth is far superior to that of the S&P’s. Based on the simple strategy, you should buy Exxon once it breaks above its 50 daily moving average.

Johnson & Johnson

J&J  is expected to see an earnings increase of 11%% in 2018. This is less than the S&P’s forecasted earnings growth of 15% in 2018.
Johnson & Johnson is below its 50 sma. Its earnings growth is also subpar. Based on the simple strategy, you shouldn’t go long J&J.

Facebook

Facebook is expected to see an earnings increase of 18% in 2018. This is more than the S&P’s forecasted earnings growth of 15% in 2018.
Facebook’s earnings growth is superior to that of the S&P’s. Based on the simple strategy, you should buy Facebook once it breaks above its 50 daily moving average.

6 comments add yours

  1. If I use finviz , how I scan the earning increase for stock ? Is it in Fundemental / EPS growth this year ? Thanks Troy

  2. Troy,
    I would assume this type of strategy can work with ETF’s as well? Instead of looking at a company’s expected earnings growth, look at the underlying assets expected growth? Is there anything you would suggest doing differently?
    Thanks and keep up the great work!
    Joe

    • Yes, it would. Essentially look for stock sectors with above average earnings growth like XLK

  3. Troy, I appreciate you giving us your knowledge on the markets, commodities and now individual stocks. Reading about your history your life took a big turn but sounds like you are happier today. Thanks for your work and giving us great insights. Walter

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