Why settle for ordinary quarterly reports?
I take a look at three companies that beat market expectations every week, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with quizzical looks on their faces can be a good thing. It usually means that the companies have more in the tank than analysts figured, and capital appreciation often follows.
Let's take a look at a few companies that humbled the prognosticators over the past few trading days.
We can start with America's Car Mart (Nasdaq: CRMT). The used car dealer posted a second quarter profit of $0.45 per share, well ahead of both the $0.38 per share that Wall Street was expecting and the $0.18 a share it earned a year ago.
I recommended the stock earlier this summer, given the company's emphasis on low-end used autos. Tough times call for big ticket bargains, and that's good news for companies like America's Car Mart and CarMax (NYSE: KMX) that are handing over the keys on secondhand drives.
Shanda Interactive (Nasdaq: SNDA) is another topper. The Chinese pioneer in online multiplayer fantasy games earned $0.56 per share in its latest quarter. Analysts were looking for just $0.51 per share in net income.
One would think that the pros would catch on here. Shanda's performance has creamed Wall Street's profit targets in each of the last nine quarters. This is a fast-growing niche where players like Shanda, Giant Interactive (NYSE: GA), and NetEase.com (Nasdaq: NTES) are generating ridiculously high net margins. As long as Shanda keeps stumping the guesstimates, it's safe to assume that Shanda is the one winning the game against Mr. Market.
Finally, we have Navistar International (NYSE: NAV) speeding past the pros. The heavy truck maker earned $3.68 per share for its latest quarter, powered by healthy growth in its military business. Navistar watchers were just flat out asleep at the wheel, projecting the company to earn less than a third of that. Yes, there is domestic weakness in its heavy trucks business, but Navistar is too big a global player to let that rain out its parade.
So, keep watching the companies that beat expectations. Over time, it will be a rewarding experience for investors as the market rewards the overachievers. That's the kind of surprise we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.
Either way, come back next Monday to learn about more stocks that blew the market away.
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