Use the Silliness of Earnings Season to Your Benefit

Earnings season is often full of surprises. That means a company can report great results, but sell off as traders didn’t think they were good enough. Or a company could lose money, but not as much as expected. When that happens, shares often soar.

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  • This can happen across any sector. But a great company in a long-term uptrend will likely keep moving with that uptrend, even amid any earnings season silliness.

    The latest market overreaction has hit Marriott International (MAR). The hotel chain beat earnings estimates, but their guidance fell below expectations. That led to a sharp selloff.

    However, Marriott’s earnings show that travel and tourism demand remains strong in this economy. Revenues are up 11 percent over the past year, and cost savings have driven earnings up 19 percent.

    Best of all, Marriott is a sharp operator with a 47 percent profit margin right now.

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  • Action to take: The hotel chain is worth buying at current prices or on any further drop, given its industry-leading position. Shares pay a modest dividend of 0.8 percent at current prices.

    For traders, shares are likely to resume their long-term uptrend following this earnings-day drop. The April $250 calls, last going for about $4.00, could see mid-to-high double-digit returns on a rebound in the coming weeks.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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