This article presents a three-step approach for identifying, by working backward from after-hours PTS trading, stocks whose prices surge after earnings announcements. It explains how even busy individual investors can narrow down stocks with strong earnings in a limited amount of time.
With approximately 4,000 listed companies in Japan, reading every earnings report is not considered realistic. Instead, this article explains the know-how behind “earnings-momentum investing,” which efficiently identifies stocks with strong earnings through 3 steps.
STEP 1 involves gauging investor reactions during the night after an earnings announcement, with an emphasis on making an early assessment in anticipation of the following day.
During the night, investors use PTS to check rankings of percentage stock-price gains in response to earnings announced after 3:30 p.m. This provides a starting point of stocks being bought in after-hours trading, after which the reasons for their gains are examined in STEP 2 and their actual price movements at the market open are assessed in STEP 3.
This approach emphasizes narrowing down the large volume of earnings information based on reactions in after-hours trading, rather than analyzing the information from the outset.