Having a portfolio full of super strong stocks with excellent fundamentals during earnings season can be a lot of fun for investors who use Portfolio Grader to make sure they are locked and loaded. These are the stock that exceed analysts’ expectations have strong revenue and profit growth and lead the market higher.
Earnings season is not as much fun for those investors who do not rely on the numbers and have stocks that report terrible quarters and see their shares downgraded by Portfolio Grader.
When our stock picking tool downgrades a stock after a poor report, you need to sell that stock right away before it drags down your portfolio returns. Here are three prime examples:
FBR & Co. (FBRC)
FBR & Co. (FBRC) is an example of a stock you want to sell if you own it and avoid the temptation to bottom fish if you don’t. Last week FBR & Co. reported that earnings fell to just 31 cents per share compared to 48 cents per share in the third quarter of 2013.
Analysts were expecting the company to earn 52 cent per share. So, it was a huge negative earnings surprise for FBR & Co. This was the second negative surprise in a row and Portfolio Grade has noticed the slowdown in the business. This week, FBRC shares were downgraded to a “D,” and FBR & Co. is a “sell” at the current price.
Federal-Mogul Holdings (FDML)
Federal-Mogul Holdings (FDML) makes power trains and components like brake pads and disks, universal joints, wipers and gaskets for the automotive industry. Although auto sales have been robust in 2014, Federal – Mogul has not been able to benefit so far.
Although sales were higher in the third quarter, Federal-Mogul earned just 13 cents a share after one-time items are subtracted. Analysts had been looking for Federal-Mogul to earn profits of 26 cents per share in the quarter. So, Federal-Mogul had a big negative earnings surprise, which is the fourth consecutive earnings miss for Federal Mogul, and analysts have been downgrading their expectations this week.
The continued deterioration of the fundamentals caused Portfolio Grader to downgrade Federal-Mogul to a “F” this week, and FDML stock is a “strong sell” after the poor earnings report.
Invacare (IVC) sells medical supplies and equipment for non-acute healthcare market. Invacare products include things like wheel chairs, beds for home health care and repository products. Given the aging population in the U.S. and increased need for home healthcare, Invacare has great story, but right now the numbers are not supporting the tale.
In the third quarter, Invacare reported a loss of 56 cents a share compared to last years loss of 23 cents a share. Wall Street was looking for the healthcare company to lose just 26 cents a share. So, Invacare had a substantial negative surprise, which was the fourth negative surprise in a row for Invacare and the second triple-digit miss in the last year.
Portfolio Grader has taken notice and downgraded Invacare to a “F-rated strong sell” last week.
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 his newsletters.