Successfully predicting big earnings surprises — and avoiding the largest negative-surprise stocks — can carry big potential rewards. Two researchers at PanAgora Asset Management demonstrate how. Breaking down the broad stock market (as measured by the Russell 3000 Index) into quintiles of earnings surprise between 1991 and 2008 shows that stocks with the largest positive
It is often declared that a good time to buy a stock is when it’s on sale. But at Putnam, we believe that valuation — the relationship between price and earnings, or between price and free cash flow, to take two common examples that indicate a stock’s relative “cheapness” — is rarely all that matters.