Getting Off at the Next Stop

04/21/2010 2:04 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

I’m going to be more aggressive than usual going into Union Pacific’s (NYSE: UNP) earnings report on Thursday, April 22, before the open. The market seems to be reacting to this quarter’s earnings reports by selling the stock on good news—unless earnings really bust through expectations and the company raises guidance a la Intel (Nasdaq: INTC) and Apple (Nasdaq: AAPL).

I expect good news from Union Pacific, quite probably even a positive earnings surprise, but I don’t think it will be enough to make the market happy. Wall Street analysts have steadily raised projections for the railroad’s quarterly official earnings—from 89 cents a share to 95 cents a share—in the last month.

But unofficial expectations are even higher. Last week, for example, Citigroup (NYSE: C) raised its earnings projections to $1.02 a share. When that’s happening in published reports, it’s a good bet that the unpublished whisper number is even higher. (For more on why I think this is a sell-on-the-good-news earnings season, see this recent post.)

But I’m not selling just to avoid a potential post-earnings drop in the shares; I added Union Pacific to Jubak’s Picks as a bet on the strength of the US economic recovery in general. I got a 5.3% return on that thesis from my March 19 buy to today, April 21.

But now I think it’s time to go for the kind of growth companies that are likely to grow faster than the economy in general. I wrote about some stocks that fit this bill in Tuesday’s Jubak’s Journal. I’m selling Union Pacific to make some room in my portfolio for one of those more focused growth plays.

As of April 21, 2010, I’m selling Union Pacific out of Jubak’s Picks with a gain of 5.3% since I added the stock on March 19, 2010.

Full disclosure: I don’t own shares of any company mentioned in this post. 

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