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The Super Bowl and Earnings Season: What They Have in Common

It’s an avidly watched, high-stakes extravaganza that plays out over four quarters. Packed with action and surprises, each quarter separates the performers from the under-performers, the winners from the losers.

I’m talking, of course, about corporate earnings season. There’s also a football game called the Super Bowl; I’ll get to that in a minute.

First, let’s turn to Linda McDonough, chief investment strategist of Profit Catalyst Alert, to get her take on the current earnings season:

“For stock analysts, earnings season is like the World Series and the Super Bowl wrapped into one. Every day there’s news hitting the wire and stocks racing up and down.

In my career, I’ve lived through over 100 earnings seasons. What’s most incredible is that the excitement from each season never diminishes. Even for a seasoned analyst like myself, there are always new twists and unexpected turns from public companies…

As I’ve said to Profit Catalyst Alert subscribers before, earnings season is when the rubber hits the road. Analysts choose stocks with the expectation that they will meet earnings expectations and hopefully lift them for future quarters. It’s hard for a stock to move up if a company misses expectations and the same degree of difficulty for a short to go down if earnings beat estimates.

The good news is there’s an abundance of trades out there waiting for us…”

Investing is a contact sport

As an analyst with over 26 years of hedge fund experience, Linda knows that investing is like a contact sport. You need to roll up your sleeves, crunch the stats, and occasionally do some broken field running.

Which brings us to the annual gladiatorial contest known as The Super Bowl. The game is America’s biggest sports event of the year, when viewers throughout the country gather to watch the two best football teams compete for the championship in the country’s most popular sport.

As I explain below, the big game also can provide a hefty return on investment for companies that advertise during the broadcast.

Super Bowl Sunday is an unofficial American national holiday and ranks as the second-largest day for U.S. food consumption, after Thanksgiving. It’s consistently the most-watched U.S. television broadcast of the year.

The game tends to have high Nielsen television ratings, typically about a 40 rating and 60 share, which translates into an audience of about 110 million. The hype leading up to the game lasts for weeks.

This year’s Super Bowl contest will be in Houston between the New England Patriots and the Atlanta Falcons, airing Sunday, February 5 on FOX starting at 6:30 p.m. EST. A 30-second commercial for “Super Bowl LI” costs $5 million, or $166,666 per second. A 30-second ad for the first Super Bowl in 1967 cost $42,000, or $1,400 per second.

And do those famously clever Super Bowl ads work? You bet they do. Viewers may watch the Super Bowl for the actual game, but they also stay glued to the TV screen to watch the ads, which have become an “event” in their own right.

The Super Bowl has evolved into a key marketing showcase for companies and their products. Companies that advertise on the Super Bowl usually experience a significant spike in sales, which can translate into immediate stock gains.

Big Soda’s “Hail Mary”…

If you’re looking for a Super Bowl play, consider PepsiCo (NYSE: PEP).

Bottled water, not sugary carbonated soda, will be the Super Bowl battleground in Pepsi’s war against arch-rival Coca-Cola (NYSE: KO). PepsiCo bought a 30-second Super Bowl ad to debut it’s new premium bottled water brand, LIFEWTR.”

Meanwhile, Coca-Cola won’t be running any Super Bowl ads for its bottled water brands Dasani and Smartwater.

Pepsi knows that Big Soda faces a big day of reckoning, as calorie-conscious consumers shun soft drinks in favor of bottled water. The beverage giant is getting ahead of the curve.

One of the surest ways to make double-digit gains over the long haul is to invest in accelerating trends that enjoy demographic, cultural and economic tailwinds. The rise of bottled water as an alternative to soda is one such trend.

Global sales of bottled water products are expected to grow at a compounded annual growth rate of 8.4% from now until 2022, according to the trade journal Brisk Insights

Another Super Bowl-related stock worth watching is little-known biotech Aethlon Medical (NSDQ: AEMD), a developer of immunotherapeutic technologies to combat infectious disease and cancer.

Aethlon isn’t advertising during the game, but an interesting news item on Wednesday caught my eye: the company’s diagnostic subsidiary Exosome Sciences will soon launch a 200-patient clinical trial to test former NFL players for a blood marker that’s a byproduct of brain scar tissue generated by chronic traumatic encephalopathy (CTE).

CTE is a disease with symptoms similar to Alzheimer’s, but it’s caused by repeated head trauma. Every Super Bowl season, attention turns to the scandal of CTE and the National Football League’s attempts to downplay the problem. CTE poses a grave threat to the multi-billion dollar industry of professional football.

Aethlon is a small company (market cap: $30.67 million), which means investors should be leery. However, the stock jumped 2.37% on Wednesday when news broke about the CTE clinical trials, so the company is on my watch list. As I’ve written in previous issues of this newsletter, small cap stocks are poised to take off in 2017. The battered biotech sector, in particular, is due for a bounce back.

Do you have any questions about earnings season or any other investing topic? Drop me a line: mailbag@investingdaily.com. (Also feel free to share your Super Bowl predictions.) — John Persinos

The inside scoop…

Did you know that any everyday investor can simply call a phone number and access “inside information” that helps to predict when certain stocks are about to move? (Don’t worry — this type of inside intel is 100% legal and above board.)

In fact, there’s a long track record of stocks taking off for double, triple, or even quadruple percent gains immediately following these phone calls.

Our very own Linda McDonough is a veteran Wall Street player, and she’s plugged into this untapped treasure trove of information. She can provide you with the inside scoop on these calls — exactly which numbers to call, the key information to listen for, the stocks you should buy, and when to sell to take your profits.

For the details (including which phone number she’s calling next) click here.

 


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