3 Stocks That Blew the Market Away

Don't settle for ordinary quarterly reports.

Every week, I take a look at three companies that beat market expectations, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured. Capital appreciation typically follows.

Let's take a look at a few companies that humbled the pros over the past few trading days.

We can start with Dangdang (NYSE: DANG  ) . Shares of the Chinese online retailer soared 24% last week after posting a narrower quarterly deficit than Wall Street was expecting. Dangdang's loss of $0.15 a share was less than the $0.19 a share in red ink that analysts were forecasting.

This is the third consecutive quarter in which Dangdang has posted a smaller loss than the pros were projecting.

InterOil (NYSE: IOC  ) was another gusher. The energy explorer's profit of $0.08 a share during the first quarter may not seem like much. Net income actually clocked in 58% lower than it did a year earlier. However, Wall Street was actually bracing for a quarterly deficit. InterOil stock moved 18% higher on the week.

Finally, we have Brocade Communications (NASDAQ: BRCD  ) landing ahead of the prognosticators.

The networking storage specialist came through with a profit of $0.17 a share. Analysts figured that Brocade's earnings would be flat with the $0.15 a share it reported a year earlier. Brocade's beat came despite revenue coming in slightly below Wall Street estimates, translating into an even bigger positive surprise in terms of net margins.

It wasn't necessarily pretty for Brocade. Unlike Dangdang and InterOil, which rewarded investors with double-digit percentage gains last week, investors weren't swayed by Brocade's performance. A big reason for the letdown -- beyond coming up short on the top line -- is that the company's guidance for the current quarter is well below where analysts are presently perched.

Beating profit targets is just one ingredient in the recipe for superior market returns.

Moving in the right direction
It's important to keep watching the companies that surpass expectations. Over time, it will be a lucrative experience for investors as the market rewards the overachievers. That's the kind of surprise that we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


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  • Report this Comment On May 20, 2013, at 9:50 AM, shirtbrigade wrote:

    Your comments on interoil, IOC are completely wrong. Since the company started its project in PNG, it has had a deal in mind to unlock its vast LNG well resources, one of the largest fields in history. They are at the final stage of closing a transaction to do this. It will mean 4 million acres of natural gas fields containing 5 good wells now and possibly 25-50 with this transaction, will be unlocked for production and shipping to the Asian markets. Natural Gas sells for much higher premiums in Asia. IOCs cost will also be the lowest of anyone in the hemisphere and for its new well discoveries, even more so. Many investors in IOC who have done the math, feel the stock could very easily reach $ 500 a share in about 3 years if this deal goes down with only modest metrics (a sell down at around 1.50 a unit of the Elk Antelope field) Every one of these articles which tries to dissect the reason IOC is running, fails completely to cite the comments the Chairman of the Board made in the last conference call and the many press releases leading up to this moment in time. Readers are selling because analysis says the revenues and earnings were not enough to justify the stock price. Well, the deal they are signing will boost revenues and earnings 10-50 time. And cut the cost to produce in half. if anything, i would think a professional would note this and tell investors what factors to investigate. The massive short interest seems to gravitate favors from all sorts of "creatures".... but shortly, they will find they have been sadly mistaken.

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