Earnings Season Heats Up
This second quarter of earnings season for 2007 is kicking off to a
wild start. Oil and other commodity prices have marched upward and
technology stocks have continued their bull run. However, to top it all
off, the Dow continues to reach new highs and is quickly closing in on the never before achieved 14,000 mark.
With all of this activity, many people have not noticed that the US
Dollar has dropped to new lows. It is especially bad versus the Euro and the Pound. Additionally, the Yen continues to hover just off of long term lows. What this does, is basically put everything in the US on sale. This discount makes US investments, including bonds and equities, attractive to European and other international investors.
What is the impact to you, the smart investor?
This additional investment flow into the equities market, creates
increased volatility. This earnings season, what you are going to see is
increased price movements both to the positive and negative on earnings
announcements. I would look for both technology stocks and resource
stocks, especially in the minerals & mining industry, to have big upside
surprises.
Importantly, with the positive economic environment we are now in,
don’t be afraid to take a very hard look at stocks that react in excess to
the downside. One bell weather stock that may be whipsawed unjustly is
Google (GOOG). I understand from CNBC that Google has had 11
positive news announcements out of the last 13 – which in my mind means that current investor expectations may be unjustly high. Google reports
earnings on July 19th, with analyst expecting sales up 60% and earnings up 44% from just a year ago.
Category: Stocks
