When the management gets weaselly…
Trivariate has scanned through all the earnings call transcripts for the top 3000 US equities since 2017 and counted the occurrences of "weasel" words (i.e. words associated with uncertainty, such as “maybe”, “could”, “almost”, “sometimes” and “depends”) in the answers from the executives on these calls. Trivariate found it to be an effective signal in distinguishing winners from losers in the lowest quality quartile of their substance model (“Junk”). The return differential between Junk stocks with declining usages of weasel words vs. those increasing their quarterly usages has generated a 50% cumulative return since 2017. This figure climbs to 85% when combining Value and Junk stocks.
Value / Junk stocks that have recently used less weaselly language (Buy ideas) include Truist Financial Corp, Stanley Black & Decker and OneMain. Sell ideas include Annaly Capital Management, AGNC Investment Corp and Zions Bank.
Edition: 183
- 05 April, 2024
Bank stocks continue to roar in January, defying “the recession”
Financials
Charles Peabody recommends fading capital markets names as the outlook is based on hope but continues to be bullish banks (as he has done since the summer lows) as NII forecasts are restrained by fear. The most predicted recession in history is being pushed out and bank prices are responding to the powerful revenues and stable asset quality on display, buttressed by the resumption of stock buybacks. Charles continues to favour Wells Fargo, JPMorgan, PNC and Truist Financial Corp.
Edition: 152
- 20 January, 2023