Watch This Before Every Earnings Report
Listen to this post
Is it a shrewd CEO? Innovative technology? A flush bank account?
All these things help, no doubt. But any company — no matter if it’s a flying car startup or a 100-year-old department store — will eventually fail if it doesn’t find someone happy to pay up for its product or service.
Quite simply, happy customers are what make great companies.
That’s why you could’ve made a killing buying Apple (AAPL) after watching folks line up to buy their third new iPhone in a row back around 2010. (A 1,500%+ return since then.)
Or steered clear of stocks like J.C. Penney (JCP)… whose stores were basically empty even before the pandemic put another nail in the coffin of brick-and-mortar retail. (Down 99% and bankrupt in just five years… ouch.)
The problem? Customer happiness is tricky to gauge. It doesn’t show up on balance sheets every quarter.
But “tricky” does not mean “impossible”…
Two shrewd analysts, who we’re proud to call part of the TradeSmith network, have leveraged the power of artificial intelligence to effectively read the minds of America’s happiest (and unhappiest) customers.
And starting early next week, they’re going to use this tech to capture quick, substantial profits by making the right calls… on the right stocks… at the exact right time.
You see, the quarterly circus of earnings season is upon us. And the Swan brothers of Derby City Insights have a plan to make their readers the rare few victors of, as they call it, “a game everyone plays but almost nobody wins.”
I’ll share more about their strategy at the end of today’s article.
But first, let’s preview the companies slated to kick off earnings season…
Is “RateGate” Over?Earlier this year we saw a slew of bank runs brought on by steep losses in long-duration Treasury portfolios. Silicon Valley Bank, Signature Bank, and First Republic all failed as a result.
That event caused a sector-wide panic. Rate hikes from the Federal Reserve were wreaking havoc on bank portfolios and putting customer deposits in jeopardy. There was a time where no bank felt safe — especially the smaller banks.
That’s why this Friday’s earnings reports from the major financial institutions — BlackRock, Citigroup, Wells Fargo, and JPMorgan — stand to be so illuminating.
You see, since the crisis in March, a surprising trend has emerged. While deposits at large banks (blue line) reached a peak and have started to trend downward, deposits at small banks (red line) have actually stabilized and are near their highs:
This seems… counterintuitive, right? If small banks present higher risks, why are they seeing higher deposit inflows?
The answer, as is typical in the financial world, lies in incentives.
Smaller banks are in greater need of deposits to shore up their books, so they’re offering higher interest rates on savings products than the banking titans. That’s attracting customers… and is at least partially the reason why small bank deposits are leveling off after losing hundreds of billions in the span of a week back in March.
To me, this is a sign of health in the sector and an encouraging signal that “RateGate” is long behind us. Small bank customers are happy to deposit and capture great yields, so that should help out the underlying stocks.
Big banks, meanwhile, have seen deposits fall by nearly $1 trillion since the crisis. That sounds bad. Banks need customer deposits to make loans, which make up most of their revenue.
But ironically, this is something of a good sign for the banking giants. Big banks are extremely well capitalized despite this drawdown, and they don’t feel the need to offer higher rates to attract more deposits.
This tells me that we should expect good things out of the banking giants when they report earnings this Friday.
But let’s give ourselves another edge.
I looked back at each of the big banks’ earnings history since the start of 2020 (as it’s a kind of “B.C./A.D.-style” turning point in financial history).
As you can see, some banks are more consistent with their earnings reports than others…
|Bank||Quarterly Earnings Misses Since 2020|
|JP Morgan Chase & Co (JPM)||3|
|Wells Fargo & Co (WFC)||6|
If you want to speculate on a bank stock to beat on earnings this Friday, your best bets are in BlackRock (BLK) and Citigroup (C), which each only had one earnings miss near the start of the pandemic.
Wells Fargo (WFC) has a spottier track record… and JP Morgan (JPM) lies somewhere in the middle.
We’ll have to check in next week and see how these earnings reports play out. And more important, how investors respond to them. Positive earnings don’t always correlate with a higher stock price.
And nobody understands this better than our friends at Derby City Insights, Andy and Landon Swan…
A Different Way of Looking at EarningsAndy and Landon learned a long time ago that a happy customer is what makes a great company. They saw through the circus of mainstream media headlines each earnings season… and instead turned to another source: social media.
By leveraging their proprietary web-crawling AI algorithm, the Swan brothers can glean key performance insights on publicly traded companies just from what people are saying about them.
That might sound odd to you. Mainstream financial media tells us that revenues, earnings, and debt are the kinds of things we need to keep track of each earnings season.
That may be true… but what they’re missing is that all these insights trace back to happy customers.
And when you consider just how much data is out there on social media, it quickly becomes clear how much more valuable it is.
There are nearly 5 billion social media users worldwide, about 60% of the world’s population. That already dwarfs the numbers mainstream media pulls in, with Fox News drawing in just 1.5 million viewers at primetime.
Even if we use the 90-9-1 rule, which tells us that 90% of social media users never post, 9% post infrequently, and 1% post frequently, that leaves us with a dataset of roughly 500 million people posting their opinions online.
Andy and Landon use their specially trained AI to crawl these social media posts for important customer insights… then translate that data into actionable trading decisions every earnings season.
They maintain a database of 464 consumer-facing American companies who they’ve found get the most social media chatter and are most impacted by customer sentiment.
And many of these companies are set to report in the coming weeks.
Andy and Landon’s earnings technique has been no slouch in past quarters. Just look at some of the gains they’ve booked in five days (or less) during the July 2023 earnings season…
- +35% on Lululemon (LULU) in just three days…
- +70% on Netflix (NFLX) in four days…
- +70% on Coursera (COUR) and 71% on Snowflake (SNOW) in five days.
Right now is the best time to join the Swan brothers as the Q4 earnings season kicks off. This Sunday, they’re sending out their first weekly report of the season. This will show subscribers which stocks to watch, and trade, over the next 10 weeks.
And if you’re new to trading, Andy and Landon have recorded instructional videos for every type of trade they recommend. So even novices have a chance to take advantage of the insights their system generates.