Stock Picking More Important This Earnings Than in 10 years - Goldman Sachs

January 13, 2014 3:19 PM EST
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Analyst John Marshall of Goldman Sachs released a note discussing tactical trades for this earnings season. In his view, stock picking is more important this this quarter than in 10 years.

"The average earnings-day move last quarter was 3.5 times as large as an average daily move. This ratio is greater than any time in the past 17 years, well above the average of 2.2 times," said Marshall. "Options markets suggest this will be one of the most important earnings seasons in 10 years for stock pickers given low expected correlation and limited pre-positioning. We expect outsized profitability for call buying strategies on single stocks this quarter."

Goldman Sach analysts are above consensus on Michael Kors Holdings Limited (NYSE: KORS), Ryland Group Inc. (NYSE: RYL), Tiffany & Co. (NYSE: TIF), EOG Resources, Inc. (NYSE: EOG), Pioneer Natural Resources Co. (NYSE: PXD), Western Refining, Inc. (NYSE: WNR), BB&T Corporation (NYSE: BBT), The Blackstone Group L.P. (NYSE: BX), Lazard Ltd. (NYSE: LAZ), SunTrust Banks, Inc. (NYSE: STI), Bristol-Myers Squibb Company (NYSE: BMY), Tenet Healthcare Corp. (NYSE: THC), Cummins Inc. (NYSE: CMI), The Dow Chemical Company (NYSE: DOW), Constellation Brands Inc. (NYSE: STZ), Aruba Networks, Inc. (Nasdaq: ARUN), Universal Display Corp. (Nasdaq: OLED), QUALCOMM Incorporated (Nasdaq: QCOM), and Xilinx Inc. (Nasdaq: XLNX).

Goldman Sach analysts are below consensus on ANN INC. (NYSE: ANN), International Game Technology (NYSE: IGT), Mattel, Inc. (Nasdaq: MAT), Rockwell Collins Inc. (NYSE: COL), Joy Global, Inc. (NYSE: JOY), and Microsoft Corporation (Nasdaq: MSFT).

"The options market is pricing in a lower earnings-day move than at any time on record for the average stock (+/- 4.9%). We expect earnings surprises to spark unexpectedly large stock moves," said Marshall.

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