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Earnings season kicks off… how the pros trade surprises… the $20 billion AI scare that wasn’t… tankers are earning $1.3 million a day … Louis Navellier’s 91% winner
Before we jump in today, I have big news…
Today marks the inaugural episode of , a brand-new investing podcast hosted by Crystal Navellier, daughter of legendary investor Louis Navellier.
Each episode will bring you fresh market insights, investing ideas, and candid conversations with some of the sharpest minds in the business.
And we’re kicking things off with a big question…
If you had $10,000 to invest right now, where would you put it?
In today’s debut episode, Crystal sits down with three InvestorPlace experts – Louis Navellier, Eric Fry, and Jonathan Rose – to hear their answers.
Q3 earnings season begins in earnest today with the big banks reporting, and if you plan to trade it, remember this…
What moves a stock after earnings isn’t necessarily how much money the company made – or lost. It’s how far the results land from what Wall Street expected.
Say Stock A earns $5 a share, but the Street was expecting $9. Despite that healthy profit, the stock will likely get hammered. Meanwhile, Stock B loses $3 a share, but analysts had braced for a $10 loss. Despite the red ink, that stock could very well soar.
The reality is that big moves don’t come from the profit or loss itself; they come from surprises – results far enough from expectations that the market is forced to reprice the stock in a hurry.
So, is there a way to get clues about these surprises before they happen?
There is. And it’s how our trading expert Jonathan Rose, editor of , approaches every earnings season.
What the pros do differently
Jonathan has spent 28 years in the markets, including time as a market maker – one of the professionals who quote prices on the other side of investors’ trades. That experience shapes how he approaches earnings today.
The average investor plays earnings by picking a stock and guessing which direction it will move after the report. Jonathan and the pros take a different approach. They play what we’ve just highlighted – the difference between reality and expectation.
To do this, they start with two numbers. The first is what we’ll call the “historical move.” Some stocks tend to make big moves after earnings, while others barely budge. Track enough quarters and a pattern emerges for each company.
The second is the “expected move.” Before every report, the options market makes its own prediction about how far a stock will swing in either direction. You can see that prediction in the prices traders are paying for options that expire shortly after the announcement.
Here’s Jonathan on what he does with those two numbers:
If those two numbers line up there’s no edge. The market has done its job.
But when those numbers don’t line up, that’s where opportunity exists. And I don’t need to guess direction to take advantage of it.
I’m not relying on being perfectly right. I’m putting myself in a position where if the move is bigger than expected, I get paid.
Jonathan and his subscribers use this approach every earnings season. They don’t try to predict – they position.
The good news is that Jonathan just flagged a handful of these opportunities.
Here’s Jonathan, talking about yesterday’s free episode of Masters in Trading LIVE:
Right now, I’ve got 34 names on the board. The data picked just six to buy — and three we shouldn’t touch with a 10-foot pole.
[], I break down the six key names flashing buy signals right now and the process that we us every earnings season to collect market-beating gains.
If you want to trade surprises this earnings season, .
A second way that the market signals a trading opportunity
The gap between historical and expected moves is one way Jonathan looks for an edge. But the tool at the center of his trading is his scanner for unusual options activity.
Jonathan built it to detect unusually large options trades, which are often the footprints of institutional players placing high-conviction bets. Time and again, these trades have foreshadowed major price moves before they hit the mainstream radar. For traders who spot them and position themselves accordingly, the result can be fast, triple-digit returns that the average investor misses.
Back to Jonathan:
Most traders wait for CNBC to tell them a stock is rallying. By then, the move is already over.
But when you learn to read the options flow? When you understand what the expected move is signaling? You’re trading with the same information institutions are using.
Jonathan will cover his entire system tomorrow night at 8 p.m. Eastern during his free . Here is what to expect:
At this special event, I’m walking you through everything my playbook has to offer — from the principles behind our trades to the charts, tools and process I use to look for an edge in the market.
This like BFLY and DOX, where unusual options activity helped us collect gains of 219% and 534% — and even returns as high as 779% and 1,076% on OXY and BMY, respectively.
To be clear, you don’t need a huge trading account to get started. Every trade Jonathan recommends has a defined maximum loss, and readers can enter each position for less than $500. How much you put at risk is always your decision.
, and we’ll see you tomorrow night.
The $20 billion question hanging over AI
Last Thursday, a single news report knocked the wind out of AI stocks.
The Financial Times reported that OpenAI told investors its annualized revenue was approaching $50 billion at the end of September. The problem was that, just a couple of weeks earlier, widely circulated reports had put that figure at $68 billion to $70 billion.
That’s a $20 billion gap for the company sitting at the center of the AI boom, with massive implications for the broader AI trade. For example, according to an analysis by venture capitalist Tomasz Tunguz, OpenAI has committed to roughly $1.15 trillion in computing infrastructure through 2035.
Chipmakers, cloud providers, and data center builders have built revenue forecasts – which flow through to stock prices – on the assumption that OpenAI’s sales will grow fast enough to pay its bills. If those sales are meaningfully smaller than the market believed, the commitments stacked on top of them start to look shakier – which means today’s stock prices are shakier.
And this is what happened last Thursday…
In the wake of that report, Wall Street panicked and immediately sold. The Nasdaq suffered its worst day since mid-August, with the heaviest damage among companies most tied to OpenAI’s spending, such as Nvidia (NVDA), Oracle (ORCL), and CoreWeave (CRWV).
So, was last Thursday’s selloff justified?
Our technology expert Luke Lango, editor of , doesn’t think so. Here he is from last week’s Daily Notes:
We think that report is a nothing burger.
The discrepancy comes down to the difference between gross and net accounting – nothing more.
It says nothing about overall AI demand, which by every measure, including those same revenue numbers, is robust and accelerating.
To see what Luke means, it helps to know how AI companies count their sales.
Many businesses buy access to OpenAI’s and Anthropic’s models through cloud platforms such as Microsoft’s (MSFT) Azure or Amazon (AMZN) Web Services, and the cloud provider takes a cut of each sale. Anthropic counts the full value of those sales as revenue, then books the partner’s share as an expense. OpenAI counts only the portion it keeps.
Neither approach is wrong, but they produce very different numbers. The roughly $70 billion figure that circulated in September was a recalculation of OpenAI’s sales using Anthropic’s method, so investors could compare the two companies side by side.
The $50 billion figure is OpenAI’s own “net” count. Put the bigger number next to the smaller one, and you get a $20 billion “shortfall” in sales that was never lost.
Once you compare apples to apples, the picture changes completely. Back to Luke:
On a consistent net basis, OpenAI’s run rate increased from about $30 billion in July to $50 billion in September. On a gross basis, it increased from about $40 billion to $70 billion.
Both comparisons show growth of roughly 70% over that period.
That lines up with what OpenAI reportedly told its own investors: total run-rate growth of 77% during the third quarter, and 107% growth in its enterprise business.
Better still, the growth is speeding up…
By Luke’s estimates, OpenAI’s run rate barely moved from March through June. Then it broke sharply higher, with net growth climbing from about 20% in July to 27% in August and 32% in September.
Year over year, he estimates OpenAI’s growth accelerated from about 131% in June to 229% in September.
Here’s Luke’s bottom line:
The takeaway: The market appears to have mistaken an accounting distinction for a demand slowdown, even as OpenAI’s underlying growth was accelerating.
Just a reminder – it’s wise to avoid a knee-jerk reaction to every bearish headline. Sometimes, the media is more interested in clicks than accuracy.
Finally, a different way to play oil
As the Middle East conflict drags on, we’ve brought you plenty of ideas for playing oil here in the Digest. Today, let’s look at a corner of the energy trade that’s been on fire: the ships that carry the oil.
The numbers are startling. At the start of the year, a supertanker carrying about 2 million barrels of crude from the Middle East to Asia earned roughly $30,000 a day, according to shipbroker Poten & Partners. That rate recently hit $1.3 million a day. Meanwhile, nine of the 13 U.S.-listed tanker stocks have more than doubled this year.
Can the run continue?
Legendary investor Louis Navellier, editor of , thinks so.
In last week’s issue, when a subscriber asked him to name his top tanker pick, Louis had trouble choosing:
Asking me to pick my favorite tanker company in the current environment is like asking me to pick my favorite child!
What we need to remember is that most crude oil tanker companies will continue to thrive in the coming months for one specific reason: Crude oil prices are not going to moderate significantly.
Normally, energy prices soften in the fall as seasonal demand slows. But Louis points out that global crude oil and natural gas inventories have been depleted, and countries around the world need to refill their stockpiles.
Here he is with the takeaway:
So, crude oil prices aren’t likely to fall below $90 per barrel.
With energy prices to remain elevated for the foreseeable future and no end in sight to the geopolitical tensions overseas, shipping rates are expected to remain high.
So, tanker companies are expected to continue to make money hand over fist, as they transport crude oil around the world.
Louis has recently added several tanker companies to the Accelerated Profits Buy List. One of his favorites is Okeanis Eco Tankers Corp. (ECO), a Greece-based owner of modern supertankers. Since Louis recommended it on June 22, ECO is up 91%.
For the rest of Louis’ tanker picks, .
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
(Disclosure: I own AMZN, MSFT)
