Stock picking
strategies focused on earnings revisions (i.e. the topic of this report) had their best performance in years. That high dispersion has driven high turnover in our list; 23 of our 25 names are new this quarter.
Stocks are increasingly making big moves on earnings relative to other days. S&P 500 stocks moved +/-4.0% on earnings day last quarter, 3.5x their average daily move (near a 20-year high).
Call buying for earnings was broadly profitable on S&P 500 companies for the 21st year in a row in 2016. We estimate buying calls on all S&P 500
stocks averaged a +13% return on premium last quarter (6-day holding period around each earnings day), in line with the 20-year average.
TMT, Industrials make up over half the opportunities on our list: While macro shifts drove sector dispersion last quarter, our conversations
with analysts reveal there are more names in the TMT and Industrials sectors with idiosyncratic fundamental drivers such as new products, restructuring and business innovation.