3 Stocks Rising on Earnings Revisions
Upside earnings revisions, along with some technical indicators, are how advisor Mike McGervey determines portfolio investments. He shares details about his method with MoneyShow.com, and discusses three current holdings.
Kate Stalter: I’m speaking today with Mike McGervey of McGervey Wealth Management.
Mike, one of the metrics you use is earnings revisions on individual stocks, taking a bottom-up approach. Tell us a little bit about what you’re seeing.
Mike McGervey: Sure, Kate. Upward revisions to estimated earnings are a great predictor of future price for us. What we see in revisions to the upside is, many times, they’re precursors to positive earnings surprises.
Positive earnings surprises are not only felt immediately, as I’m sure as you may know, but the effects of a positive earnings surprise can last well up to a year. Oftentimes, they’re followed by more earnings surprises, for example.
And as a result of this, it puts us in a position to build a solid book of stocks, if you will, that we can then filter fundamentally, take it a step further. And even as great as these securities may be, we can then utilize technical analysis to enhance the timing of our buy decisions, and conversely, to provide a sell-side discipline on the downside.
Kate Stalter: You just mentioned some of the technical indicators. Which ones do you track, and what are they showing you these days?
Mike McGervey: We use a variety of different things. Moving averages at the very basic level. Relative strength index is very helpful.