Earnings Season: How to Find Companies That Can Adapt and Thrive

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Earnings season has been a godsend in these troubled times. Since Wall Street turned its attention to first-quarter earnings in April, stocks as a whole (as measured by the Wilshire 5000) gained about 11.5%. Within that, the “growthier” indexes like the Nasdaq and Russell 2000 are up more like 16%!

Well, now it’s May – and the reality is, things are going to get a lot bumpier. Once earnings season wraps up in the next week or so, investors will be left with COVID-19 and economic headlines to set the tone.

Until we can reopen the economy, those economic data points are going to look horrific. So, by late May, the overall tone of the market won’t be nearly as good.

What can investors do in that environment? We certainly can’t retreat to bonds, with Treasury yields still in the “bargain basement”…as are many commodities like oil, for that matter.

What we can do is this: Focus on stocks whose management has proved able to adapt to current circumstances…and even thrive. They’re out there! And I devote all my energy in my newsletters like Growth Investor to finding them.

Some companies are delivering revenue growth and even earnings beats. Many others simply can’t, as shown by the fact that S&P 500 companies are averaging a 13.6% drop in first-quarter earnings and 0.6% revenue growth.

So, it’s all the more impressive when companies like Invitation Homes (NYSE:INVH), one of my large-cap stocks, more than double their earnings amidst the coronavirus pandemic.

INVH stock is a unique housing play, based on a portfolio of single-family-home rentals in 17 popular U.S. cities. Its mission statement is “together with you, we make a house a home,” which includes proximity to jobs and good school districts, three-, four- and five-bedroom homes, pet-friendly homes, Smart Home technology, 24/7 emergency maintenance and customer-focused property management.

During this pandemic, that mission also includes payment plans to give its tenants more flexibility. So far, that’s ultimately led to higher resident satisfaction and 95% of residents paying rent in April.

Ultimately, first-quarter earnings of $0.09 per share on $450 million in revenue represented 3.3% annual revenue growth and 125% annual earnings growth. The analyst community was expecting earnings of $0.05 per share and revenue of $443.57 million, so Invitation Homes posted a whopping 80% earnings surprise and a slight revenue surprise.

At least, it was a “surprise” to other people. The signs were already there for this earnings beat, as you can see in INVH stock’s Report Card in my Portfolio Grader:

INVH Stock: Earnings Season - How to Find Companies That Can Adapt and Thrive

Above you’ll note the strong Earnings Momentum and even stronger history of positive Earnings Surprises. All in all, INVH is a B-rated “Buy” now. By sticking with the nine factors that distinguish great growth plays, I’ve found plenty of “Buys” and even “Strong Buys” for Growth Investor now.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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