Monday, July 27, 2009


Recently 70% of the dow jones companies beat analyst estimates for corporate earnings. The question is that is this sustainable. My view is not due to the following reasons

1. Most EPS beat analyst estimates due to cost cutting and not due to revenue growth.
2. Analysts collectively tend to underestimate or overestimate. In Q2 they did underestimate. Perhaps they should have tied up with consultancy companies to determine exactly how much cost cutting was done. Well they were not innovative. Now for Q3 they will probably overestimate. This is make EPS for the companies to underperform. And shares will drift downwards. This week this correction will probably happen as the news regarding revenue dips permeates in the community.

btw, there are two ways to bet on this.

1. To take this as the correct prediction and short the market (sell your holdings)
2. Important one - My friends from Infosys used to always use the anti-gd strategy. i.e when I sold my shares they bought it and when I did buy they sold it and they really made (claimed) good money out of it. I dont think their strategy is anything different now as well (despite me carrying a coveted MBA). So go ahead for this one as well

ps:- The risk is assumed by thyself.
Just sold some Infy shares

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