An Earnings Trade That's Better Than GOOG, INTC

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Although earnings season technically starts this week with Alcoa Inc. (NYSE: AA), the big boys start rolling out their numbers next week. That’s when we’ll see Intel Corporation (NASDAQ: INTC), JPMorgan Chase & Co. (NYSE: JPM), Google Inc. (NASDAQ: GOOG) and General Electric Company (NYSE: GE) dominate the headlines.

Amid these big names, though, will be a number of smaller companies that are perhaps more interesting from a trading perspective. Among those is telecommunications equipment provider ADTRAN, Inc. (NASDAQ: ADTN), which reports Tuesday after the close.

While analysts expect the company to post a 26% increase in profits from a year ago, the future may be ADTN’s main appeal, as most of the $7 billion or so earmarked for broadband and wireless in the 2009 federal stimulus package has yet to be allocated.

ADTN has met or beaten the consensus estimate for the past 10 quarters. And the stock has done well after recent reports, gaining around 8% in just the one day following the past two releases.

On the charts, ADTN is breaking out to a multi-year high, as it continues to soar past strikes with heavy call open interest. The next obstacle is the January 2004 high above the $37 mark.

ADTN Stock Chart

Sentiment toward ADTN is mixed. Analysts generally favor the stock, although the configuration hasn’t changed for the past three months even though the stock has gained 25%. Short interest is rather high, which could add some buying power from a short squeeze.

Jump on ADTN now ahead of earnings, as the stock usually gains ground headed into its report. The at-the-money ADTN Nov 36 Calls should provide plenty of leverage to capture a solid gain on this earnings trade.

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Article printed from InvestorPlace Media, https://investorplace.com/2010/10/an-earnings-trade-thats-better-than-goog-intc/.

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