There is a proven correlation between the whisper number from WhisperNumber.com and stock movement. It has also been proven that our whisper number provides greater returns when used as an investment vehicle. And that's the value of the whisper we provide. Not one investor or trader has ever been able to tell us how they use the analyst's estimate to make a better trade. It may be because there is no proven correlation between the analysts estimate and stock movement.
The primary strategy to best utilize our data is understanding the price reaction of a stock when it beats or misses the whisper number. While having a 'number' that can accurately predict the actual earnings reported is 'nice' (and what the media will tend to focus on) it can't help traders make money.
Here is a simple example: If you know that Microsoft will report 25 cents, what does that mean? The true key would be knowing which way the stock will move if they report 25, 26 or 27 cents (or whatever the actual may be) - that would help investors position the best trade and make the best returns. This is the data we provide our registered users.
Analysis of our data shows S&P 500 companies that exceed both the whisper number and the analysts estimate see a 2.5 times greater positive post earnings price move than companies that only exceed the analysts estimate but miss the whisper.
WhisperNumber.com has put together those companies most likely to see price volatility according to whether or not they beat or miss the whisper. These companies have a high probability of positive price movement following the earnings report if they beat the whisper number, and negative price movement if they miss the whisper number. Click here to learn more.
Other Basic Strategies:
A. Daily Investor Sentiment - Positive
If expectations for quarterly earnings are exceeded, the investor feels 'confident' and 'secure' with their investment. The company is rewarded for exceeding expectations with the result being an increase in stock price on a short-term basis. Our data is proven to be a reliable, prescient, and accurate indicator of this type of stock movement.
B. Daily Investor Sentiment - Negative
If expectations for quarterly earnings are not met, the investor is disappointed and insecure with their investment. This results in a decrease in stock price on a short-term basis. Our data is proven to be a reliable, prescient and accurate indicator of this type of stock movement.
C. 'Early Warning' Earnings Radar
Whisper Numbers below the consensus numbers can prove to be an early warning that a company may issue an earnings warning or some form of changed earnings guidance. Example; On December 12th, 2000 the consensus number for Microsoft's yet to be released earnings was $0.49 per share. The whisper number was declining for several weeks and had settled at $0.47 per share. Two days later Microsoft issued a profit warning for the first time in ten years stating that - "earnings were expected to be $0.46 or $0.47 per share. The revised expectations for both revenue and earnings per share represent a reduction of five to six percent from prior guidance." This is just one example of how our pro-active data can be used as an early warning indicator in determining company direction due to its accuracy and basis on real time market conditions.
D. 'New Stocks' To Watch
We track the number of 'whispers' collected for the stocks we follow. If a company has never had a whisper in past quarters, and then appears in our database with a high number of whispers, there is a noticeable reaction in stock movement (primarily a tendency to increase in price.) This trend indicates that exposure or popularity of that stock is increasing (or an indication that recent events have made this stock stand out and be noticed by the investment community.) It is a significant indication that stock activity is probable. A basic query of our data will allow you to pinpoint this type of activity.
E. 'Old Stocks' Not to Watch
Just as our data allows you to find 'new' companies in the public eye, it will also help you find companies falling out of the public eye. This is a significant indicator of companies that could remain flat or have little movement in and around quarterly earnings periods. A basic query of our data will allow you to pinpoint this type of activity.
F. Recent Trends
Analysis of the rise or fall of the whisper number will allow for a daily insight into the flow of sentiment within the investment community. Sharp rise or fall in whisper could indicate significant stock movement.
G. Significant Difference between Whisper and Consensus
A significant difference between a whisper number and a consensus could be an indicator on a few levels:
On the high side: Investor sentiment is over exuberant (leading to a possible let down in expectations)
On the low side: Consensus estimate is not yet revised to current market conditions (expect a warning from the company). If company surprises the investor based on their real-time low expectations this may result in a surprise and short-term bullish move.
Why would there be a wide disparity between the consensus and whisper? Because there is a significant difference between the analysis of the professional and the expectation of the individual. The expectation of the individual is based on current market conditions and has proven to be a more pro-active indicator of stock movement. Our data allows you to see this disparity, analyze the significance of the difference between the two, and make appropriate investment decisions.
I. Surprise Versus Expectation - Positive
Regulation FD (Fair Disclosure) has had a significant impact on the information now available to the demographic we monitor. The open announcements, and in many cases guidance, now being made by companies (both positive and negative) allow this demographic the access to more timely information affecting their investments. A positive announcement can have an impact on the expectation of the market (thus increasing the whisper number). Open guidance such as this could lead to limited upside movement once actual earnings are announced (in other words the stock movement is already built in prior to the actual announcement.)
J. Surprise Versus Expectation - Negative
Surprise information can be found in announcements, Regulation FD, earnings warnings, etc. All can lead to surprise information being placed into the market. Was this information already predicted in the whisper data? Or brand new to the market indicating even lower expectations pushing decline in price?
K. Industry Sector Analysis
A positive report from one company can bring the entire sector to new heights, and a negative report from one company can bring the entire sector to new lows. Understanding the effect of expectations on stock movement will allow for better industry analysis.