Investors may have to dig deep to find upside during fourth-quarter earnings season, but there are still likely winners, according to Goldman Sachs. In a note to clients Thursday, CEO John Marshall said the options market suggests Wall Street needs to be blown away for companies to be rewarded this earnings season. “Unlike most quarters where we focus on call buying, we recommend taking a directional balanced approach to earnings events this quarter, as low implied movement indicates a below-average probability of recovery rallies on earnings days,” Marshall said . Still, there are a few individual stocks that Goldman analysts are particularly bullish on, and these could be candidates for upside bets, either by buying shares outright or using call options. Investors can use call options to play earnings season by buying contracts that, according to the report, have a slightly higher strike price than the current market price. If the stock rises after the strike price report is published, the investor can use the call option to buy the stock at a discount or sell the option at a profit. The following stocks have buy ratings from Goldman analysts where the company expects a healthy earnings hit. One stock on this list that Goldman analysts are particularly bullish about not just for the upcoming earnings report but for the full year ahead is agribusiness Bunge. Goldman expects Bunge to beat Wall Street’s earnings estimates by more than 20% over the next four quarters. Bunge is also on Goldman’s conviction list along with mining stock Freeport-McMoRan. Another industry name on the list is Caterpillar, which is off to a hot start in 2023. The stock hit an all-time high on Friday and is up 7.7% year-to-date. CAT 1Y Mountain Caterpillar stock hit a 52-week high on Friday. Caterpillar isn’t the only hot stock on the list. Expedia, which is up 21% so far this year, is also popular with Goldman analysts. Conversely, there are other stocks that look like negative outliers to Goldman. Cheesecake Factory and Western Digital both have earnings declines of more than 20% in their upcoming reports, according to Goldman. To play these stocks, investors could use put options. This trade uses the same structure as call options, but in reverse, and serves as a bet that the stock will fall. An advantage of both call and put options is that the potential loss from trading is limited to the upfront price paid to purchase the options contracts. – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/15/these-tactical-trades-are-some-of-goldmans-ways-to-play-q4-earnings.html These tactical trades are some of Goldman’s ways to play with Q4 earnings