Why settle for ordinary quarterly reports?
I believe that the biggest factor in a stock's ability to beat the market is its ability to beat the market's expectations. That's why I look every week at three companies that have humbled Wall Street's pros over the past few trading days. If a company has more in the tank than the analysts figured, capital appreciation often follows.
We can start with Novell (Nasdaq: NOVL ) . The former tech bellwether posted an adjusted profit of $0.11 a share in its latest quarter, ahead of both the $0.06 it earned a year ago and the $0.07 analysts were expecting. Novell's workgroup division continues to struggle, but its Linux angle continues to improve. Just as Red Hat (NYSE: RHT ) has found a lucrative niche in monetizing the Linux platform, Novell needs to get over NetWare and throw a little more muscle behind its open-source initiatives.
The finish was a little closer at Staples (Nasdaq: SPLS ) , where the office-supply superstore registered net income of $0.39 a share. That's short of the $0.42 it earned a year ago, but it was just enough to best Wall Street's $0.38-per-share target.
Staples is an important company to keep an eye on during the recovery. Any corporate turnaround will be reflected on the performance of retailers such as Staples and Office Depot (NYSE: ODP ) , as well as corporate-furniture specialists Herman Miller (Nasdaq: MLHR ) and Knoll (NYSE: KNL ) .
Finally, Big Lots (NYSE: BIG ) thumped the pros on Friday. The closeouts specialist posted a record profit of $0.27 a share in its fiscal third quarter, smashing through the $0.18 that the pros were targeting and the $0.15 it earned a year earlier. It's really no surprise to see shoppers attracted to the store's clearances and overstocks.
Keep watching the companies that surpass expectations. Over time, doing so 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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