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Missed Earnings Estimates – Betting Against The Wall Street Consensus

In my career as a speculator a career that is now well past forty years I have always been a contrarian. I have always bet against the Wall Street consensus because that’s where the money is. I can safely say it has never been more profitable to bet against the Wall Street consensus than it is today. Wall Street today as never before in its history is dominated by “herd behavior.” Day after day, the Wall Street herd stampedes in and out of stocks based on nothing more substantial than today’s headlines. Headlines that are so unsubstantial and of such transitory importance that 60 days from now no one will even remember them. Wall Street’s stupidity has become one of my favorite article topics.

My topic today is one of Wall Street’s greatest stupidities, “missed earnings estimates.”

To explain this stupidity more fully let me fabricate a tall tale. Let us imagine that five skid-row bums decide to become stock analysts and issue estimated future earnings reports.

For their first venture, they pick a stock that is currently being followed by only two analysts. Their stock pick XYZ is earning a profit is well thought of and is rising in value.

They are too bullish on the stock. Their new higher consensus estimate swamps the more realistic estimate of the two old pros who have been following the stock. XYZ does well but not well enough. Its earnings are up a respectable 18 cents a share for the quarter but the new consensus estimate was not 18 cents a share but 20 cents a share.

XYZ has committed one of Wall Street’s greatest crimes. It has missed an earnings estimate. The stock is brutally mauled. Therefore, the next consensus estimate is reduced say 1 cent a share to 19 cents. Once again, XYZ misses its earnings estimate. It reports an earnings increase of only 15 cents a share and once again, the stock is hammered. The stock analysts having now been burned twice reduce their consensus earnings estimate increase for the next quarter to only 15 a share. Once again, XYZ misses the consensus earnings it reports an earnings increase of only 12 cents a share.

In the eyes of Wall Street, this is the kiss of death. What is even worse is that the reported earnings increase has been falling for three straight quarters from 18 cents a share to 12 cents a share The stock is crushed. It is easily possible for a stock that has missed three straight earnings estimates to fall 35% or more in value.

For a contrarian speculator like me this stock is now a raging buy. The overwhelming probability is that XYZ will annihilate the next quarter’s earnings estimate. How do I know this? Let’s take an honest look at XYZ’s real performance. By any rational measure, it has performed very well indeed. In the last three quarters, it has increased its earnings by an impressive 45 cents a share and its reward for this stellar performance is that the stock has fallen 35%. Why has the stock been crushed? It has been crushed because five skid row bums who have nothing whatsoever to do with the company they are covering fabricated over optimistic numbers.

At this point, you might inform me that stock analysts are not skid row bums but respected Wall Street professionals. My response to that is that when you follow these alleged pros for as long as I have it is not hard to conclude that they might as well be skid row bums. These guys will put you into the poor house.

Welcome to the wonderful world of Wall Street where stupidity reins supreme.

There are two additional reasons to love this stock. The first reason is that there are multitudes of stocks on Wall Street whose earnings are strongly seasonally influenced. XYZ has reported three weakening quarters. Thus there is an excellent chance that the next quarter will be it strongest quarter of the year.

The most powerful reason however is the fact that the consensus estimate has been too bullish three times in a row. There is nothing more disastrous for stock analysts than to overestimate earnings for three quarters in a row. The investors who follow their reports are getting killed and they are not going to be happy about it. The consensus earnings estimate will now be ruthlessly cut perhaps to only 8 cents a share. The overwhelming probability is that XYZ will now report a strong quarter and will easily blow away this fear induced low-ball estimate. A return to the 18 cents to 20 cents a share range would not be out of line.

Earn Money Through Affiliate Programs – Earn Money At Home

Do you want to earn additional money every week? And eventually shift from full-time office job to a home-based business of your own, working less but earning more cash?

To those who want to earn money at home, joining affiliate programs is one of the fastest ways to get started. This entitles you to endorse customers to different products and get paid generous commissions for every successful sale. As an affiliate of the program, you are provided your specific link to the product so the company identifies when a buyer you referred avails the product, which is the means to earn money through affiliate programs.

For beginners, what are the advantages of being an affiliate endorser? There are plenty. Many companies give generous commissions to affiliate endorsers, with some giving as high as 50% incentives on products you endorse clients to buy. This enables you to generate additional earnings, earn money at home, and eventually surpass the fixed income your current job is giving you. This is really a lucrative business to venture into, as thousands of people purchase products through the internet every minute every day. Note that you did not create these products yourself. And it’s so easy to find ways to advertise your links, a lot of times at no cost!

How do you earn money through affiliate programs?

Creating blogs pertaining to these products you’re endorsing is an effective way. You become recognized in the online marketing community, building up your integrity. Posting blogs on a topic at various viewpoints deepens your knowledge about the product you are affiliated with, enabling you to determine your aimed market. The more blogs you post, the more you get recognized by more people, greatly helping you when you soon run your own website and earn money at home through your affiliated programs.

Posting these blogs for free gives you free advertisements of your links to your products, enabling you to market these to web-savvy people attracted to your blogs, which is a necessity to anyone who intends to purchase your affiliated products online.

Several article directories permit inclusion of your links to your products at the end of your blogs, even some giving you certain payments for posting your blogs. A powerful way to attract many customers is through writing convincing articles that are not too sales-driven, simply suggesting to people how their financial earnings can greatly improve and earn money at home when they consider the products you are affiliated, and how they too can earn money through affiliate programs.

You will eventually desire to go bigger by having your own website. It need not be very complicated, as it should be something that people would be able to have great ease navigating. Your website will have your links to your affiliated products, capable of having your own customer base. This gives you innumerable opportunities to promote your products to your prospect buyers, generating you sales to earn money through affiliate programs. Coupled with existing social sites allowing you additional marketing channels, there’s no stopping you to earn money at home through these affiliated programs, confident of the high quality of products you are endorsing.