In this article, we discuss the 10 stocks to buy before their earnings reports. If you want to read about some stocks with upcoming growth catalysts, go directly to 5 Stocks to Buy Before Their Earnings Reports.
Momentum is easily one of the most often-used terms in the world of stocks and finance. Investors usually buy shares of firms that are rising rapidly and then look to unload them as prices peak. Earnings season brings about a massive surge in momentum investing as the market climbs along with earnings and vice versa. This method of investing was popularized by Narasimhan Jegadeesh and Sheridan Titman through a 1991 research paper titled Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency.
In the paper, the duo argued that investors who had used the near-term performances of a company as a barometer of success and unloaded equities that had performed poorly were able to generate significant positive returns in a calendar year. As a large number of publicly-traded firms once again prepare to release their earnings, it might be a good idea for investors to put the Jegadeesh-Titman conclusions to the test. Some of the stocks to buy before their earnings reports include Tesla, Inc. (NASDAQ:TSLA), AT&T Inc. (NYSE:T), and HCA Healthcare, Inc. (NYSE:HCA).
Our Methodology
The companies that are expected to declare their earnings sometime this week were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks were also considered.
Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of around 900 elite hedge funds tracked by Insider Monkey.
Luis Louro / shutterstock.com
Stocks to Buy Before Their Earnings Reports
10. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 26
Earnings Due On: April 21
Nucor Corporation (NYSE:NUE) makes and sells steel products. The stock has gained in the past few days as a European Union ban on Russia imports goes into effect, pushing coal prices in Europe to their highest in over a month. The company has also recently invested $15 million in nuclear energy tech developer NuScale as part of a wider plan to develop small modular nuclear reactors that will act as a transition between fossil fuels and renewables for a carbon-free future.
On March 23, JPMorgan analyst Michael Glick maintained a Neutral rating on Nucor Corporation (NYSE:NUE) stock and raised the price target to $129 from $113, noting that there was broad upside for the steel industry through the rest of 2022.
At the end of the fourth quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $186 million in Nucor Corporation (NYSE:NUE), compared to 25 in the preceding quarter worth $199 million.
Just like Tesla, Inc. (NASDAQ:TSLA), AT&T Inc. (NYSE:T), and HCA Healthcare, Inc. (NYSE:HCA), Nucor Corporation (NYSE:NUE) is one of the stocks on the radar of elite investors.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Nucor Corporation (NYSE:NUE) was one of them. Here is what the fund said:
“Our active approach also applies to being disciplined in managing positions in companies in more cyclical industries and taking profits during stronger periods of each cycle. We closed a position in steel maker Nucor Corporation (NYSE:NUE) during the quarter after the shares had more than doubled over the last year as a direct participant in the recovery of the U.S. economy and rebound in industrial activity. At this point in the cycle, we no longer view the risk/reward as compelling and feel more confident in deploying the proceeds in more attractive areas discussed in this and previous letters.”
9. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 40
Earnings Due On: April 20
ASML Holding N.V. (NASDAQ:ASML) operates as a semiconductor firm. The company was recently named among a basket of equities by Bank of America that are expected to benefit from the ongoing supply and demand imbalances. The bank singled out ASML as one of the players expected to soar amid scarcity in the processing power sector. Analysts underlined that ASML was the “:only global supplier of extreme ultraviolet equipment” and as features became smaller, more complex lithography equipment was required.
On March 17, Goldman Sachs analyst Alexander Duval upgraded ASML Holding N.V. (NASDAQ:ASML) stock to Conviction Buy from Buy with a price target of EUR 930. The analyst identified the firm as a core digital enabler given a monopoly position on Extreme Ultraviolet Lithography.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ASML Holding N.V. (NASDAQ: ASML) with 4.2 million shares worth more than $3.4 billion.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and ASML Holding N.V. (NASDAQ:ASML) was one of them. Here is what the fund said:
“During the quarter, we reduced our semiconductor exposure through the trim of ASML (NASDAQ:ASML) to manage concerns of a slowdown due to the risk of double ordering and potential softness in some consumer end markets. We increased our position in IT services with the purchase of Accenture as we remain optimistic about the long-term growth potential these companies provide, which is underpinned by the compressed digital transformation cycle, rising cloud adoption and growth in data-driven insights.
Despite the market volatility and hyper focus on rising rates, chief information officer surveys continue to forecast resilience in IT budgets this year. Growth in IT spending for 2022 is expected to remain above the 10-year pre-COVID-19 average, according to Morgan Stanley. We believe this is a result of the strong secular underpinnings brought on by digital transformation and businesses focusing on increasing efficiencies through technology.”
8. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 41
Earnings Due On: April 20
Alcoa Corporation (NYSE:AA) makes and sells aluminum products. The Russia-Ukraine war has lifted prices of aluminum to new highs in recent weeks. Continuing supply fears from Russia and a weakening dollar have also contributed to this rise. The company has also recently fired up 20 smelting pots at the Alumar smelter in Brazil as part of a wider plan to restart aluminum capacity at the plant. The smelter has three smelting lines with 710 pots. The full capacity of the smelter is 447,000 metric tons per year.
On March 25, Goldman Sachs analyst Emily Chieng reiterated a Conviction Buy rating on Alcoa Corporation (NYSE:AA) stock and raised the price target to $115 from $88, identifying improved leverage position, structural growth in the longer term outlook for aluminum demand, and focus on decarbonization as some of the growth catalysts for the stock.
At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Alcoa Corporation (NYSE:AA), compared to 44 in the preceding quarter worth $1.7 billion.
7. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 55
Earnings Due On: April 21
Snap Inc. (NYSE:SNAP) operates as a camera company. On March 23, the company announced that it had acquired NextMind, a Parisian startup that has developed a non-invasive technology which allows brain activity to be translated into signals. These signals are afterwards converted to digital commands. The investment is likely to complement the long-term augmented reality research efforts of the company. The firm is also investing heavily in artificial intelligence technology.
On February 4, Jefferies analyst Brent Thill maintained a Buy rating on Snap Inc. (NYSE:SNAP) stock and raised the price target to $60 from $55, noting that the firm had posted user growth for the fifth straight quarter despite privacy headwinds.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE:SNAP) with 33 million shares worth more than $1.5 billion.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE:SNAP) was one of them. Here is what the fund said:
“Snap Inc. (NYSE:SNAP) is the leading social network among teens and young adults in North America and a growing number of overseas markets, including Western Europe and India. Shares fell this quarter on a greater-than anticipated impact from Apple’s new privacy changes for iOS mobile devices. These changes made it more difficult for Snapchat to measure the effectiveness of ads shown on its platform. We believe this is a near-term, industry-wide issue for which Snap Inc. (NYSE:SNAP) is already developing a solution. Longer term, we continue to view Snap Inc. (NYSE:SNAP) favorably as the company sustains its rapid pace of product innovation and expands its premium partnerships with advertisers.”
6. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 62
Earnings Due On: April 20
Lam Research Corporation (NASDAQ:LRCX) markets semiconductor processing equipment. The company has an impressive dividend history stretching back around 7 years. On February 10, the firm declared a quarterly dividend of $1.50 per share, in line with previous. The forward yield was 1.01%. In earnings results for the second quarter, Lam Research beat market expectations on earnings per share by $0.02 but missed on revenue by almost $180 million. The firm expects gross margins of 45% in the coming months.
On February 7, Stifel analyst Patrick Ho maintained a Buy rating on Lam Research Corporation (NASDAQ:LRCX) stock and raised the price target to $837 from $775, noting that the base business of the firm was providing a growing and steadier source of revenue.
At the end of the fourth quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Lam Research Corporation (NASDAQ:LRCX), up from 47 the preceding quarter worth $3.5 billion.
Along with Tesla, Inc. (NASDAQ:TSLA), AT&T Inc. (NYSE:T), and HCA Healthcare, Inc. (NYSE:HCA), Lam Research Corporation (NASDAQ:LRCX) is one of the stocks that hedge funds are buying.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Lam Research Corporation (NASDAQ:LRCX) was one of them. Here is what the fund said:
“Lam Research Corporation (NASDAQ:LRCX) was a material contributor during the quarter. The company designs and manufactures equipment used in the fabrication of semiconductors. Consolidation and key shifts within the industry have improved the company’s competitive position in the industry and are driving demand for more complex capital equipment. The company’s near-term outlook improved during the quarter as customers announced plans to increase capital spending.”
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Disclosure. None. 10 Stocks to Buy Before Their Earnings Reports is originally published on Insider Monkey.
