There is a theory that companies that produce positive earning surprises post better than average returns during the next period. We will test that theory. By their own statistics, Starmine gets the subsequent direction of stock performance right 70% of the time using their process. We will look at 5 positive predicted surprises and 5 negative predicted surprises. We should end up with about 7 stocks going in the direction indicated. Under their research, you would be bullish on the positive stocks and bearish on the negative stocks.
Starmine predicts that CELL (Brightpoint Inc), CSX (CSX Corp), GILD (Gilead Sciences Inc), PD (Phelps Dodge Corp) and DRQ (Dril-Quip) should produce positive earning surprises. Starmine predicts TSN (Tyson Foods), SNDA (Shanda Interactive Entertainment), RSH (Radio Shack Corp), EMN (Eastman Chemical Co), and FNF (Fidelity Natl Finl Inc) should produce negative earning surprises. We will look at the earnings of these companies when they are announced to see if they give the predicted surprise, and then in one quarter we will see if those that did produce the forecast surprise performed in the direction anticipated.
For those who are observant, Happy Passover.
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