Earnings season is in full swing!
The Dow Jones Industrial Average is running circles around the S&P 500 and Nasdaq Composite this week. The Big Board was up as much as 200 points yesterday thanks to key earnings beats from Caterpillar (NYSE:CAT) and 3M (NYSE:MMM).
It’s no coincidence that these stocks are leading the Dow higher. After all, these are the same two companies that have opened earnings season strong and helped vault the blue-chip index to new highs all year.
Back in the spring, perennial loser Caterpillar provided a huge boost to the Dow when the company raised earnings guidance and reported growth in its construction business. Shares soared nearly 8% in just one day. Yesterday, CAT and 3M jumped 5% to post new all-time highs. Both stocks are powering to impressive double-digit gains this year. CAT is up a shopping 53% in 2017, while MMM is up almost 34%.
Not bad for a couple of stodgy Dow names…
Earnings season is just getting started. The TV is bombarding us with numbers every single day.
But we’re less interested in the debating the nuts and bolts of the big earnings reports. In fact, it’s our contention that earnings season is a dreadful time-suck.
We don’t care too much about earnings “beats” or “misses”. Instead, we’re far more interested in how earnings announcements throw a wrench in our trading gears. After all, you could have a nice little uptrend on your hands that hits a brick wall because investors decide they don’t like something about the company’s revenue growth or how the CEO answered a question on the conference call. It’s downright maddening.
That’s why we spend our time analysing the market’s reaction to earnings. The price action is far more important than the numbers themselves. I don’t care if you hop in a time machine and grab tomorrow’s paper in advance. The headlines can’t tell you how stocks will react.
So instead of chasing these runaway earnings winners or betting big on potential beats or misses, we’re digging up some unlikely bottom-feeders this week.
Remember 3D printers?
You might recall the 3D printing craze of 2012-2013. It was an amazing run for 3D printer stocks. When these names were hot, there was nothing this new technology couldn’t do. The go-to trade was 3D Systems Corp. (NYSE:DDD), which returned an impressive 140% in 2013.
But by the very next year, the hype got out of hand. The tech prognosticators said every family would soon own a 3D printer that would spit out replacement parts, toys and custom-made widgets. In reality, all we were getting was plastic junk from the consumer models. The red-hot trade soon began to fizzle. This week, you can pick up DDD stock for about $12 a share.
But the 3D printers look like they’re bottoming out, setting us up for fast, double-digit gains when speculators swoop in to play these formerly red-hot tech names.
While DDD stock has gotten chopped in half since the spring, shares are catching a bid this week at an area where buyers have swooped in for the past 18 months. The stock was up almost 5% yesterday.
When these stocks catch a bid, they can post some insane rallies. If you’ve been around these parts long enough, you know that we made more than a few profitable trades on the 3D printers in the past. In fact, we booked gains of 20% in just five days during DDD’s epic run-up off its January bottom back in 2016.
If you’re looking to skirt the earnings season blues, these forgotten 3D printing plays could be your ticket to some quick gains…