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Sometimes, you've got to look beyond the rosy headline stats to get a clearer picture of what's happening pseudonymous macro account "MrBlonde" did just that in this Twitter thread on Sunday, showing that corporate earnings in the 2nd Quarter are actually worse than they look.
2/7 …also notable is the smaller than average EPS surprise rate, particularly relative to the last couple years. so fewer companies are beating lowered estimates by a smaller amount… pic.twitter.com/YzbqVvlX27
— MrBlonde (@MrBlonde_macro) August 1, 2022
4/7 …for those into details est cuts for 3Q over the last month are broad based. Its difficult to find 2023 estimates trustworthy when there is barely visibility one quarter ahead. This is the nature of earnings driven declines and why it takes longer to play out. pic.twitter.com/fBxGWkE4Zw
— MrBlonde (@MrBlonde_macro) August 1, 2022
6/7 2Q season does little to sway the view earnings will stay under pressure for next few qrtrs and have high probability of posting negative growth in 1H23. The PMI fall and magnitude of EPS revisions are confirming the long-held view from earnings growth leading indicator. pic.twitter.com/aZXjh3EViJ
— MrBlonde (@MrBlonde_macro) August 1, 2022
7/7 if you like charts and data driven viewpoints you can find more of it here:https://t.co/33LR9XwItO
— MrBlonde (@MrBlonde_macro) August 1, 2022
Let's take a look at how our system is positioned in light of this.
As regular readers know, our system doesn't consider the macro picture when selecting its top names. Instead, it gauges stock and options market sentiment to estimate which securities are likely to perform the best over the next six months. Nevertheless, some themes were apparent from our top ten names at the end of July:
Screen capture via Portfolio Armor as on 7/29/2022.
Each of our top ten names above can be cost-effectively hedged with optimal collars or optimal puts. Consider doing so if you're going to buy any of them, in the event we're wrong.
At the end of last month, our top ten names were 100% in energy, as you can see below.
That cohort is 20.9% so far, versus 9.21% for SPY since June 30th. So far, it looks like the new factor we added to our security selection process in late June is aiding performance.
So we've gone from 10 out of 10 top names being energy names at the end of June, to 6 out of 10 at the end of July.
