Individual stocks on February 24-25, 2018: strategy


I stated that even a simple quantitative strategy can be used to successfully pick & 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% for 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. Goldman Sachs (GS)
  2. Twitter (TWTR)
  3. Disney (DIS)
  4. Coca-Cola (KO)
  5. Intel (INTC)

Goldman Sachs

Goldman is expected to see an earnings increase of 9.1% in 2018. This is less than the S&P’s forecasted earnings growth of 15% in 2018.
Goldman is above its 50 sma. Its earnings growth is inferior to that of the S&P 500’s. Based on the simple strategy, you should not go long Goldman right now.

Twitter (TWTR)

Twitter is expected to see an earnings increase of 172% in 2018. This is much more than the S&P’s forecasted earnings growth of 15% in 2018.
Twitter is above its 50 sma. Its earnings growth is superior to that of the S&P 500’s. Based on the simple strategy, you should go long Twitter with a stop loss at Twitter’s 50 sma.

Disney (DIS)

Disney is expected to see an earnings increase of 21.8% in 2018. This is more than the S&P’s forecasted earnings growth of 15% in 2018.
Disney is below its 50 sma. Its earnings growth is superior to that of the S&P 500’s. Based on the simple strategy, you should wait for Disney to cross above its 50 sma before going long.

Coca-Cola (KO)

Coca-Cola is expected to see an earnings increase of 9.5% in 2018. This is less than the S&P’s forecasted earnings growth of 15% in 2018.
Coca-Cola is below its 50 sma. Its earnings growth is also subpar. Based on the simple strategy, stock pickers shouldn’t go long Coca-Cola right now.

Intel (INTC)

Intel is expected to see an earnings increase of 1.6% in 2018. This is much less than the S&P’s forecasted earnings growth of 15% in 2018.
Intel is above its 50 sma. Its earnings growth is inferior to that of the S&P 500’s. Based on the simple strategy, you should not go long Intel right now.
 

3 comments add yours

  1. Out of curiosity, where are you pulling the data of expected 2018 earnings increase of each individual company? And how accurate have these forecasts been in the past? Not questioning your analysis, just would like to have some more background.

    • Question away Mahn 🙂
      The data comes from NASDAQ.com
      Earnings expectations tend to be revised down as the year goes on. But keep in mind that earnings expectations tend to get revised down ACROSS THE BOARD, including to the S&P 500 index.
      Kind regards,
      Troy

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