Best Performing Stocks of Earnings Season (So Far)

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The S&P 500 could be days from creating a new all-time high, and this is all possible because we’re seeing signs of strength in the economy with superb earnings. Going into earnings season analysts were worried about results because of fiscal cliff and debt ceiling concerns. However, as of January 28, 60.8% of companies have beat top line expectations and 63.9% have beat bottom line expectations. With that being said, I am looking at the best of the best.

Company

Stock

Date

1-Day Performance

Netflix

(NASDAQ: NFLX)

1/23

42.22%

Swift Transportation

(NYSE: SWFT)

1/23

28.45%

Travelzoo

(NASDAQ: TZOO)

1/24

24.31%

Cree

(NASDAQ: CREE)

1/22

22.05%

Super Micro Computer

(NASDAQ: SMCI)

1/22

18.63%

Netflix Delivers on All Metrics

Netflix tops the charts after its Q4 earnings crushed expectations. The company was expected to post a loss of $0.13, but instead posted a profit of $0.13 as it added more than two million subscribers and guided for subscribers to reach almost 30 million. The company’s domestic streaming margins rose 210 basis points and said that content costs are expected to grow at a slower pace. Therefore, the stock is returning back to its glory days, having rallied 143% in the last three months. The good thing is that Netflix is still about 45% off its all-time highs and has managed to continue growing its revenue during its 16 month period of flat trading. Although I do not own shares and believe there is a significant risk of a downtrend, I acknowledge that it could very well continue to trade higher now that investors are optimistic of its future.

Swift Still Presenting Value

Swift Transportation continues to trade at new 52-week highs after being greatly undervalued prior to earnings. The company of course beat expectations, but more importantly grew in all segments of its business. Investors are now optimistic that the company will continue this strength throughout the remainder of this year. And the fact that the transport sector is trading at all-time highs bodes well for confidence. The stock continues to trade with a price/sales ratio of 0.50 and a forward P/E ratio of 10.95 which leads me to believe, that with improvements, it’s the best of the earnings bunch for a long-term investment.

At Second Glance the Reaction Seems Appropriate for Travelzoo

After Travelzoo’s earnings report I immediately criticized the gains, however, much like the previous two stocks, it had traded flat for many months and was due for a breakout. At first I only looked at its modest revenue growth of 5%, but after further research I see that what’s impressive is its presence on social media channels such as Facebook, 23% growth in Europe, and conversion rate improvements. Therefore, this was a good quarter. With the stock being cheap compared to others in the space I think it presents little risk. However, I’d like to see one more good quarter before I am ready to turn all bullish.

Cree Continues to Rally and Remains Expensive

Cree has continued to rally since posting its blowout Q2 report, and is now sitting at new 52-week highs. The company increased guidance, improved its basis points both over last quarter and on a yearly basis, and showed strong numbers in all segments. As a result, the stock is now quite expensive, above my comfort zone, but I wouldn’t be surprised to see it tick higher in the coming months due to such a strong quarter.

Super Micro Tries to Reverse the Trend

Super Micro Computer has fallen 27% over the last year, yet just posted a phenomenal quarter where it grew revenue by 16% year-over-year and excelled in all areas of its business. Much like Swift it remains a cheap stock, and therefore, might be a good buy now that some momentum is starting to present itself.

Conclusion

These companies all operate in different industries and are unrelated as far as fundamental performance. But they all share one common trait: Each had either traded lower over the 16 months or had traded flat after a large sell-off. Therefore, the market was surprised by such encouraging results. Its trends such as this that investors should try to identify, and are what could aid in finding good investments prior to earnings. I now urge you to take time and perform your own due diligence to determine if any might fit into your portfolio before making any investment decisions. 

 


BrianNichols owns shares of SWFT. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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