A lot of market observers are making a noise about the fact that 75% of S&P 500 stocks that issued guidance pointed lower. So far, 91 of the 108 companies issuing guidance said that the rest of the year would not live up to prior expectations — and many think this is a reason that the market simply must go down.
But it ain’t necessarily so.
Although the 75% figure is above the historical average, it is below the percentage of companies issuing negative guidance in the first quarter of this year and the final quarter of 2013 at the same point in earning season. Also keep in mind that 392 stocks in the index had no comment or guidance at all for the balance of 2014.
While the overall results of earning season were not spectacular, the rest of the year looks pretty bright — and most analysts expect earnings growth to accelerate.
Of course, you won’t be surprised by negative guidance if you use Portfolio Grader to guide you through the twists and turns of the market. To earn a high grade in the stock-picking tool, a company has to be showing sales and profit growth, margin expansion and better-than-expected results. Look at some of the companies that lowered guidance this quarter and you will see what I mean. Portfolio Grader downgraded shares of Target (TGT) to “Sell” last August and again to a “Strong Sell” in March of this year. Walmart (WMT) has been a “Sell” since January. JPMorgan (JPM) has been rated “Sell” since before earnings season began: Portfolio Grader downgraded the stock in April.
Now let’s look at some of the stocks that raised their earning guidance in the past quarter. Lockheed Martin (LMT) raised guidance for the full year. The strong fundamentals at this company caused Portfolio Grader to upgrade the stock to a “Strong Buy” back in January. The stock has been either a “Buy” or a “Strong Buy” all year and has gone up by more than 60% in that time period.
Chinese online retailer Vipshop (VIPS) raised its estimates for the year as well. The stock popped after the announcement … but that would be old news for users of Portfolio Grader. The stock has been a “Strong Buy” for over a year and has risen by 400% in that time frame as the strong fundamentals attracted strong buying pressure.
The pundits and media will always find something to worry about on Wall Street. By using Portfolio Grader to find the stocks with the very best fundamentals and prospects, investors can ignore the noise and focus on finding the stocks that will lead the market up and over the wall of worry.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of this newsletters.