Earnings season is well under way, and we have already seen some big earnings surprises, both positive and negative.
While a lot of big-name companies have already reported their quarterly results, there are still plenty of companies left, and there is still enough time to make a few pre-report trades with a good chance of enjoying a post-earnings bounce.
Earnings season is a volatile time, and as we recently witnessed with Apple’s (AAPL) latest disappointing quarterly report, stocks can make big moves in reaction to their quarterly numbers.
As a result of the increased volatility around quarterly reports, traders need to be extra careful when buying stocks prior to their quarterly report.
We want to make sure that we look for stocks that have shown recent strength, and also are trading at reasonable valuations. By focusing on stocks with attractive valuations, we can maximize the possibility of an upside move, while partially insulating ourselves from post-earnings weakness should the company report weaker than expected results. The lower the P/E the better, but in some cases we can even look past the valuation if Wall Street has proven a willingness to support the stock at a higher than usual valuation.
I like each of the following stocks ahead of their upcoming earnings reports, and would consider setting up new positions, or adding to current positions prior to their quarterly reports.