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Update on Cummins and Yum Brands, Post-Earnings


Cummins offered a weaker than expected outlook for 2012. Yum Brands offered better than expected numbers.

MINYANVILLE ORIGINAL Cummins (NYSE:CMI) stock closed down 3.20% to 87.79 on a weaker than expected outlook for 2012. On October 2 we moved to a Strong Sell on the name. Conversely, Tuesday night we saw better than expected numbers from Yum Brands (NYSE:YUM) due to increased strength out of Asia. We moved to a Buy back on September 19 at $67.70. So where are we going with this?

First, let us say that no one can forecast earnings enough to trade ahead of earnings. You'd be better off going to Vegas. We never trade ahead of earnings, however, if we are long term investors we will hold into earnings.

With this being said, sometimes the price action of a stock will show certain quantitative signals prior to earnings. Why is this? Well the hard-working ladies and gentlemen who are making $5, $10, and $20 million a year on the buy-side cover a select few names and have a good idea going into earnings where their names stand on the earnings front. This is not inside information; this is homework that none of us can possibly do without having access to the best sell-side analysts and the CFOs of Cummins and Yum Brands on speeddial. Our algorithm is our advantage and we believe price action leads fundamentals.

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No positions in stocks mentioned.
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