How smart are analysts at forecasting earnings? I have a long-running debate with the analyst community on this point. The analysts (and the people who circulate their numbers) think they're pretty good. I think they all too often miss by a wide margin, especially on high-multiple growth stocks, where a disappointment can send a stock reeling...
Stick to value stocks and hope for positive surprises. Here are three:
AllState (57, ALL) saw earnings suffer from the 2005 hurricanes. With an 18 P/E, it gets short shrift from analysts but will recover sharply and show them. Another insurer, Hartford Financial Services (92, HIG), with a 12 P/E, has a strong first quarter that blew away the consensus. Managed care leader UnitedHealth Group (44, UNH), with a 18 P/E, saw profit margins double in the last five years.
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Stick to value stocks and hope for positive surprises. Here are three:
AllState (57, ALL) saw earnings suffer from the 2005 hurricanes. With an 18 P/E, it gets short shrift from analysts but will recover sharply and show them. Another insurer, Hartford Financial Services (92, HIG), with a 12 P/E, has a strong first quarter that blew away the consensus. Managed care leader UnitedHealth Group (44, UNH), with a 18 P/E, saw profit margins double in the last five years.
Read the complete column
