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   How does StarMine predict surprises, and how can I profit from them?
 
   StarMine uses SmartEstimates to create better company forecasts. When the SmartEstimate deviates significantly from the mean, StarMine predicts additional analyst revisions or a surprise. If it is early in the fiscal period, there is time for analysts to revise their estimates in order to account for new information. In this case, the SmartEstimate is often a leading indicator of future analyst revisions. Toward the end of a fiscal period, fewer analysts may revise their estimates. In this case, the SmartEstimate more often predicts surprises.

Stocks with positive surprises tend to have above-average price performance. Stocks with negative surprises tend to underperform the market. Therefore, one simple trading strategy is to buy stocks with high predicted surprises and to sell either when the SmartEstimate and mean converge or after earnings are reported. If a stock you already own is showing a strong negative predicted surprise, you may want to sell your position in anticipation of the mean falling or the company missing its numbers. You can use StarMine Professional to find both positive and negative predicted surprises.

In addition to using SmartEstimates to identify new investment opportunities, you can use them to help time trades. It is better to move to stocks with high predicted surprises sooner rather than later and, if you are already looking to sell, to move out of stocks with high predicted negative surprises sooner.

The links below take you to examples of how SmartEstimates predicted positive surprises.

Alcatel - stock down 65% after StarMine prediction for a negative surprise

Micron Technology - stock up 25% in one month after StarMine positive prediction


See also:
What is a SmartEstimate?


See glossary for: Mean, SmartEstimate


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