EarningsBeats.com Digest

Published: Mon, 11/25/19

EarningsBeats.com Digest for November 25, 2019

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Dear EarningsBeats Digest Member.

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What to do with the Best of the Worst?

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I try to communicate often about the importance of relative strength. An individual stock's relative strength to its peer group is very important, but so is its peer group to the benchmark S&P 500. If an industry group is seeing plenty of positive money flow, then stocks within the group stand to benefit more than if the opposite is true. Currently, the opposite is true for the telecom equipment industry ($DJUSCT). The group printed a double top in July, then later broke down. But Palo Alto Networks (PANW) has been soaring despite the weakness in its industry:

Later today, after the bell, PANW will released its latest quarterly results. Given the huge move higher in the stock of late, I'd say that Wall Street is expecting a very positive report. But I'll say this. Wall Street likely will not forgive PANW if the results fall short - not with money already rotating out of that industry. I do expect a solid report, but I typically feel better about a company heading into earnings if its industry group is healthy as well. That's not the case currently with telecom equipment.

Happy trading!

Tom Bowley

Chief Market Strategist

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