The Only Type of Headline Worth Clicking

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There’s a lot of noise in financial media.

Buzzwords… biased articles purporting to be news… and “hot tips” echo constantly.

Those new to investing could find all this constant information overwhelming, making it hard to discern what’s truly important.

I’ll be blunt… most of what you read and hear about stocks offers zero value.

Don’t believe me?

Think about the last time you read about company XYZ getting downgraded by a bank… Or some anonymous sources suggesting revenue weakness…

The initial reaction hits the stock price… Then, after the click piece runs its course, the stock returns right back to its previous level.

This happens time and time again… and surely won’t stop anytime soon.

But what if I can save you a lot of time and effort, sifting through those countless articles… outlining the ONE type of headline that offers the most important buy signal?

That’s what we’re going to do today.

We’ll break down this powerful forward indicator that typically comes around earnings season, like we’re in right now…

AND, as a bonus, I’ll offer up one of my favorite superstar A.I. companies that just fired the ultimate buy signal.

The Holy Grail of Buy Signals

Remember how I said most of what you read and hear about stocks will offer zero value? Earnings reports are the exception.

Earnings reports are some of the highest value signals in the market… They’re as real as it gets.

Every quarter during earnings season, companies display their financial report card. They reveal to the world how their business did the prior three months.

But more important than that is the company’s future outlook. Give a poor outlook and your stock is sure to fall. Offer a rosy forecast, and your stock will surge.

The forward guidance is often the most important part of a company’s earnings report. And in them, we occasionally find the most powerful of news-driven buy signals.

In some rare instances, business conditions have improved so much that a company feels it’s necessary to send out a press release updating and raising their prior guidance.

This is the holy grail buy signal… practically guaranteed to send a stock into the stratosphere.

These reports essentially tell the Wall Street community, “Hey guys, I know we told you we’d earn $X this quarter, but turns out we were way off… it’s actually a lot more!”

This reset of expectations is powerful, and you need to pay attention to any company that’s doing it. Especially companies participating in red-hot investment trends.

Now, let’s cover a recent example where this exact type of press release sent an A.I. juggernaut surging…

Buy The Powerful “Beat and Raise”

Let me introduce you to Super Micro Computer (SMCI).

If you’ve never heard of this underfollowed semiconductor company before… you’re in for a treat.

SMCI is in the fast-growing A.I. server business. It provides the computing muscle that A.I. companies need to scale. That makes it one of the best A.I. infrastructure plays you’ll find.

On Thursday night, SMCI dazzled the Street with a mind-blowing beat and raise.

They raised preliminary second-quarter revenue guidance by nearly $800 million and their net income by roughly a dollar per share, nearly 25% above expectations!

Here’s a snapshot: Source: Business Wire
Ladies and gentlemen, this is a blowout report.

And this is why…

You see, Wall Street analysts and fund managers have models that estimate stock values.

Once new earnings revisions hit, their models all get updated at the same time.

Growth rates explode…

Equity values climb…

And buy tickets start spitting out of the machine. It becomes a mad dash of new capital.

And to prove to you how real and powerful of a guide this was, just have a look at what happened to the stock the next morning.

Not only did the stock make a new high — it jumped 30%! Source: Yahoo Finance
And here’s the beauty…

I’ve known about this stock for a couple years now. Because it’s been one of the most-loved companies by institutions since the bear market of 2022.

Recently I introduced the three steps to finding superstar stocks:

• Focus on revenue growth
• Focus on earnings growth
• Follow the Big Money support

I’ll add one other nugget to be on alert for: the out-of-the-blue beat and raise. This is when companies both beat their earnings estimates… and raise their earnings forecasts.

Following this playbook brought SMCI to my attention in mid-2022. Below shows you the single signal that encapsulates the three traits.

Every blue bar represents the times when Super Micro Computer sported top-ranking fundamentals and heavy institutional buying.

It started when SMCI was just $58 per share: The repeated signals are most important. More and more money keeps lifting the stock higher and higher, as the shares adjust to the monster earnings growth. That’s the stairway to heaven!

Those signals also include numerous beat-and-raises along the way.

And as of Friday, the stock has ripped to $423.

Most best-of-breed stocks have a chart that looks just like this… Showing strong fundamentals and massive institutional interest.

So, as you sift through the endless headlines, remember to focus on the ones that can help you make money: earnings reports.

And pay close attention to the rarer hidden treasure chest, the preliminary beat and raise.

This is why using software and analytics will only help your investing process.

Regards,

Lucas Downey,
Contributing Editor, TradeSmith Daily