2014 is here and with it begins a new year for investors. In December the expected sell-off designed to create end of the year tax losses was nowhere to be found, in fact the S&P 500 index was up 1.5%.
Stocks typically rally in January as investors no longer worry about end of the year tax positions and load back into equities, this phenomenon is known as the January Effect.
Here are 5 stocks for this month that analysts expect to not only benefit from the January Effect but also crush Wall Street’s earnings expectations and outperform the market.
The information below is derived from data submitted to the Estimize platform by a set of Buy Side and Independent analyst contributors.
1. Monsanto Co. (MON)
The current Wall Street consensus expectation is for MON to report 63c EPS while the current Estimize consensus from Buy Side and Independent contributing analysts is 71c EPS.
Over the past 6 quarters Estimize was more accurate in forecasting Monsanto’s profit 4 times. The Estimize consensus is more accurate than Wall Street up to 69.5% of the time because it represents market expectations without suffering from some of the biases that hinder sell-side analysts. By tapping into a wider distribution of 3,400 contributors including hedge funds and independent analysts as well as students and non professional investors, Estimize is better able to capture the true market outlook.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Our quantitative research conducted by former hedge fund traders has found that when there is a positive earnings differential between the Estimize and Wall Street consensus numbers the stock price will on drift up on average, outperforming the market going into the report.
2. Goldman Sachs (GS)
Wall Street is expecting Goldman Sachs to report $US4.02 EPS while the Estimize community is expecting $US4.16.
Over the past 6 quarters the consensus from our Buy-side and Independent contributing analysts has been more accurate in forecasting Goldman Sachs’s earnings all 6 times. GS has beaten the Wall Street consensus for profit 8 times in a row and our contributors are expecting that pattern to continue.
3. Apple (AAPL)
Apple is scheduled to report its FQ1 2014 earnings on January 22. Wall Street is forecasting $US14.02 EPS while the consensus from 89 contributing analysts at Estimize is $US14.36.
The holiday season is always a big time of the year for Apple and our contributing analysts are confident that Apple will post strong quarterly results. Apple recently came to a deal with China Mobile to have the iPhone distributed in China for the first time, over 100,000 iPhones were pre-ordered in the first 2 days they became available.
Apple’s stock has had a check shaped year, share prices dropped over the 2 quarter period where it beat Wall Street once but failed to live up to the market’s expectations as represented by the Estimize consensus. Over the past 2 quarters the stock price has climbed from $US438.93 to $US555.13 and is carrying some momentum going into their January earnings release.
4. Caterpillar (CAT)
Shares of Caterpillar did not do well in 2013. On a year when the Dow Jones Industrial Average Index returned nearly 26.5%, Caterpillar stock regressed from $US93.28 to $US90.81.
This January our contributing analysts are predicting that Caterpillar will beat the Wall Street consensus on profit by a wide margin. Our analyst are making a bold call for $US1.47 EPS while Wall Street only has earnings at $US1.29 per share. Because there is such a large differential here and the January Effect is in play, we could see a significant gain in the Caterpillar share price before the report.
5. QUALCOMM (QCOM)
At the end of the month Wall Street is expecting QUALCOMM to report $US1.20 EPS while the Estimize community is forecasting $US1.25 EPS. As displayed in the graph above QCOM posted tremendous financial results in 2013 experiencing year over year growth in each of the past 4 quarters. On the 29th our contributing analysts are expecting QCOM to profit 1c short of the FQ1 results from last year, while Wall Street is expecting EPS to drop by 6c.
As mentioned earlier, our statistical research has shown that on average when the Estimize consensus is higher than Wall Street’s the stock price tends to drift upward going into the earnings release if you benchmark against the market. For that reason, we could see these 5 stocks climb higher through January.
Head over to Estimize to learn more about strategies hedge funds are using to leverage our data set and sign up for free to see how you stack up to Wall Street and your contributing analyst peers.
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