Page 498 - How to Make Money in Stocks Trilogy

368 INVESTING LIKE A PROFESSIONAL

© 2009 Investor’s Business Daily, Inc.

One last thing: earnings are what drive a stock, and the rate of earnings
improvement is more important than the P/E ratio. So, you want to make
sure you check the “Company Earnings Reports” that come out at certain
times during a quarter. You can discover a company that’s suddenly showing
much better earnings than in the past.
It helps to be up on stocks that come through with better-than-expected
earnings—what the Street refers to as “earnings surprises.” What we have
learned to watch for are stocks whose earnings estimates are constantly
being raised and that show an acceleration in their percentage rate of
increase in earnings quarter by quarter. As mentioned earlier, the bigger the
earnings increase, the better. And we don’t fall into the trap of eliminating
any stock just because its P/E ratio looks high.
To wrap up the paper, we cover more futures and options than most pub-
lications. There’s a column on the bond market, several interest-rate charts
and tables, and no fewer than 36 charts on commodities futures.