High-Yield Bond Prices’ May Forecast Equity Price Movements

Stock market participants “seeking an informational edge should keep their eyes on junk-bond prices on the heels of earnings reports,” according to a recent Bloomberg article. In a paper from the University of California at Berkley, assistant professor Omri Even-Tov shares findings stemming from analysis of bond returns following nearly 20,000 quarterly earnings announcements of 770 companies between 2005 and 2014. He writes, “The bond price reaction provides incremental explanatory power for post-announcement stock returns over and above the information contained in the earnings surprise…the level of reported accruals…and the immediate stock price reaction to the earnings announcement.” The paper […]

Best Earnings Season Since 2011

As of last week, the majority of companies that reported earnings have beaten estimates, making this earnings season one of the best since 2011. This according to an article in last week’s Barron’s. The upbeat results, in many cases, apply to both the top and bottom lines, the article says, with much of the outperformance “driven by the big year-over-year jump in energy prices…as well as rising interest rates.” While first-quarter earnings are set to expand 11.4% from a year ago, the article suggests that “a closer look reveals why investors may want to curb their enthusiasm.” Wall Street analysts, it […]

Doll on the Markets Positives and Negatives on Today’s Market

In a recent Barron’s article, Nuveen Asset Management’s Chief Equity Strategist Bob Doll says that, despite disappointing first quarter results and apparent earnings struggles, consumer spending will be a healthy tailwind for the economy as a whole. He offers contrasting views of the current market situation:   Positive: Equity valuations don’t appear to be stretched; Earnings improvements should materialize in the coming quarters; The tumult in the oil market appears to be over; Investor sentiment may be overly bearish; Corporate tax reform prospects for next year appear strong.   Negative: Improvements in the earnings outlook are probably necessary for equity […]

Good Strategies Look Beyond Earnings

Whether it’s talk about earnings growth or earnings estimates or price/earnings ratios, stock market news is usually filled with discussions of corporate earnings. But in his latest for Seeking Alpha, Validea CEO John P. Reese says that good investing goes beyond looking at earnings-related metrics. “Earnings don’t always tell the whole story,” Reese writes.  “In fact, oftentimes other metrics can provide an even better gauge of how a company or the market is doing. The Price/Sales Investor strategy I track on Validea.com is a good example. The key variable it looks at is the price/sales ratio – PSR – which […]