MI264: How to Pick Stocks Using Earnings Estimate Revisions, Price Trends, and Valuations w/ Sam Burns | The Intrinsic Value Podcast - The Investor’s Podcast Network | Podwise
This episode explores the surprising resilience of the stock market in 2023, despite widespread economic pessimism and concerns about inflation and earnings downgrades. Against the backdrop of initially negative predictions, the market has performed better than expected, a phenomenon Sam Burns, Chief Strategist at Mill Street Research, attributes to volatile economic data and the unexpected strength of the economy. More significantly, the discussion pivots to the role of analyst earnings revisions, with Burns highlighting a recent easing in the pace of estimate cuts, particularly in the technology sector. For instance, Burns' investment strategy focuses on identifying sectors with the strongest upward earnings revisions, positive price momentum, and favorable valuations, using a combination of top-down and bottom-up analysis. He emphasizes the importance of considering the "year ahead" estimates rather than focusing solely on quarterly figures, as the latter can be subject to manipulation. In contrast to the prevailing narrative, Burns suggests that the inverted yield curve may not carry the same negative implications as in past cycles due to ongoing fiscal support. Ultimately, Burns' analysis suggests a cautiously optimistic short-term outlook for the market, with a longer-term perspective acknowledging the need for positive earnings growth to sustain stock price appreciation. What this means for investors is a need to focus on relative strength within sectors and individual companies, rather than making broad market predictions.
