We’ve talked a lot about earnings lately for a simple reason. When the market starts drifting into a realm of rumor and supposition, concrete numbers provide an anchor of material fact for the noise to swirl around.

That’s especially true now, as earnings season gears up with a majority of companies raising their guidance for the current quarter into 2022. And yet the stocks are being punished for not being euphoric “enough” to satisfy expectations.

Those investors can’t point to anything wrong with these companies or even worse than what we projected all along. They’re simply hunting excuses to sell.

And that’s an urge that they’ll find a way to satisfy no matter how good the numbers are. Let them sell. It’s an opportunity for the rest of us to grab dynamic companies on the dip.

But I promised you numbers where others might be content to lead the cheering. All right. Here we go.

The Sky Is Not Falling

No matter how much “bad news” you’ve heard over the last few weeks, the fundamental picture hasn’t deteriorated more than a rounding error here and there . . . and even then, you need to squint to see the weakness.

Expectations for the current earnings season peaked in August. At the time, we thought we’d get maybe 28% bottom-line improvement compared to last year, which is admittedly slowing down from the early easy COVID comparisons but still nothing to ignore.

Now all the best minds on Wall Street put together are looking for 27.6% growth this quarter. The difference is negligible. If that’s the reason you’re selling stocks you held onto in August, you’ve lost your nerve.

And before you say the market always anticipates developments, the world doesn’t look much weaker in the immediate future. Projected growth in the new fourth quarter remains steady at 21.3% to 21.5% . . . and the target is actually edging higher as companies start issuing guidance.

Likewise, expectations for 2022 are creeping up and not down. We’re still looking for 9.4% growth next year while consensus is now around 9.6% . . . stronger than it was a few months ago.

Stronger targets normally justify higher stock prices. Admittedly, stocks are already trading at high valuations, but for the market as a whole earnings multiples have receded in recent months.

It isn’t much relief, but here at 20.1X future earnings the market only looks a little rich. The numbers are going in the right direction with every company whose quarterly results we see.

Is The Fed The Fear Factor?

Growth targets have remained steady. Stocks have dropped about 4.5% . . . and people are blaming the Fed for making “unsustainable” multiples incrementally harder to accept.

I don’t think this is the Fed’s fault. We’ve seen that every 0.25% that short-term rates move translates into roughly 2% up or down for the S&P 500, so if people are afraid of the Fed, they’re betting on two rate hikes on the horizon.

That’s vanishingly unlikely. And it’s an opportunity to buy the dip.

The only thing driving the fear on Wall Street is fear itself. Or maybe, to be a little more precise, exhaustion.

It’s been a big couple of years. A lot of people are tired. They’re looking to take a break, retreat to the sidelines and rest.

That’s not my style. Dynamic companies deserve a little flexibility on the multiples because they’ll grow into their valuations fast.

And if not, we can always accelerate our performance by layering options around our stocks.

I was just doing a lot of charts and the right call position can easily double or triple the upside a stock provides. A put can make money even if the stock goes down . . . a lot of money, sometimes turning a point of downside into 20 points of pure profit.

We’re doing a lot of options trading right now. We just made 50% last weekend on Apple puts. And we keep doing it.

Cannabis Corner: The Right Kind Of Cuts

Aurora Growth Corp. (ACB) only needed better messaging. What did I tell you last week?

“Investors needed to see proof that the discipline would leave a sustainable core for future growth ahead.”

We didn’t get that when ACB cut payroll 8% and sparked rumors that its growth trajectory would wither like buds in an understaffed greenhouse.

This week, management finally delivered the rest of the story: this is what it takes to push the existing operations to sustainable profitability.

I wish we’d heard that at the beginning. But it’s what it took to make ACB a star in the cannabis group this week.

Better messaging will be nice, but late is better than never.