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Tickers in this Article: YHOO, GOOG, WAG, CVS, WMT, BA, C, CFC
As we all know its earnings season, and this means that many companies will be releasing their Q3 numbers and possibly giving guidance for the fourth quarter and beyond. This period seems to have stressed some people out as I've been asked a multitude of questions about what I think about certain companies and their prospects going forward. So, lets dive into some questions.

Q: Why has Yahoo's (Nasdaq:YHOO) stock been doing so well when Google (Nasdaq:GOOG) is the No.1 search engine?

A: Good question! There are a number of unanswered questions about the future earnings potential of Yahoo and the market share of web searches it will garner going forward. However, there are some exciting things going on. First off the company beat Wall Street estimates by three cents a share in the third quarter. In addition, its CEO and co-founder Jerry Yang gave the impression to the Street from its press release that the company is about to undertake a fairly major effort to improve traffic to its site and to grow the overall business.

For example, he said that the company would work on integrating more of its assets into the home page and on securing more online advertising partners. Moreover, that the company would focus less on smaller one-off type projects.

The point is that some investors believe that Yahoo is once again headed in the right direction, and this is why the stock has been inching up. (For more on Yahoo's recent rise, see Yahoo's Q3 Shows Signs Of Life.)

Q: How will we know when the real estate market had finally bottomed?

A: This is going to be hard to predict; however, there will probably be some signs when the tide is starting to turn. For example, if and when that happens I think we will see management at big-name homebuilders such as Toll Brothers (NYSE:TOL) start to book more orders and ratchet up their estimates. I also think that Wall Street analysts (who also know the industry well) will start to upgrade some of the companies.

Finally, pay attention to what is happening in your local real estate market. Look specifically for the number of homes for sale to decrease and for prices to stabilize or to start inching up. Also, check out new home builders. Once they stop offering deep discounts to buyers, it likely signals that they think the tide is starting to turn in their favor.

Q: Why aren't drug stores like Walgreen (NYSE:WAG) doing very well?

A: It's true that Walgreen stock has taken a bit of a tumble recently. There are several factors to consider. First off, some investors were put off by the company's fourth-quarter results in which profits fell 4% (to $412.3 million from $396.5 million) compared to the same quarter of last year. In addition, the company is facing intense competition from the likes of CVS (NYSE:CVS) and especially Wal-Mart (NYSE:WMT), which has been luring customers by selling some prescriptions for $4!

However, it's important to note that Walgreens same store sales remain healthy and that it continues to grow. It just opened its 6,000th store last week. According to analyst opinion data from Thomson Financial, Wall Street is expecting the company to grow at an almost 14% pace per year over the next five years (due to strength in both its front-end and pharmacy businesses). This growth is nothing to sneeze at.

Over the long run, I continue to think Walgreens stock will fare just fine. (To read my take on the stock back in March, see There's Still Room For Two Winners.)

Q: Boeing (NYSE:BA) has warned that its 2008 revenue will be lower than expected. Is the stock headed lower too?

A: While Boeing's third-quarter numbers were pretty solid, management indicated that its 2008 revenue numbers could be hurt by launch delays in its 787 Dreamliner Aircraft.

This delay could end up hurting the share price over the short term because a number of retail and institutional investors initially purchased the shares on the excitement that the 787 generated and because the company was able to take advantage of weaknesses in its key rival Airbus. With Dreamliner on hold and Airbus starting to get its act together. I just don't see that same type of excitement here - at least in the near term.


Q: Are there any stocks that could take advantage of the "January effect"?


A: I'm very cautiously looking at Countrywide Financial (NYSE:CFC) right now in hopes that the subprime mess is largely factored into the share price, but I haven't made any final decisions. However, my top pick right now in terms of tax-loss candidates is Citigroup (NYSE:C). (To learn more about tax-loss selling, see Selling Losing Securities For A Tax Advantage.)

In 2008 I suspect that one of two things is going to happen. Either Citigroup's CEO, Chuck Prince, is going to turn things around, or he'll be out of a job. And frankly, I think that either scenario would be good for the stock. In addition, the company already absorbed some big hits after its third-quarter earnings fell 57% in response to the credit crunch. I think this has also been largely factored into the share price.

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