Your Next Great Stock: How to Screen the Market for Tomorrow's Top Performers

Chapter 14. The Surprise, Surprise Screen

If you want to feel slow, try this: Watch a financial news channel and wait for a company to report much-better-than-expected earnings. Then, as fast as you can, call your stockbroker or log on to your trading account. Try to buy the stock before it moves higher. Make sure you use a limit order—one that specifies the maximum price you want to pay. Chances are, though, you won't bother placing the order. By the time you pull up a quote on the stock, it will already be up considerably from where it was before the news broke.

It used to be possible to make a living by trading off of earnings news. I witnessed the death of the practice in the 1990s while working as a stockbroker. My best customer and the company's biggest commission generator had two things that allowed him to get to trades faster than other investors. The first was a Cold-War-style hotline—a dedicated phone on my desk that rang the moment he picked up the handset in his rural, upstate New York home. The second was something largely unknown to individual investors at the time: real-time, scrolling financial headlines delivered over a computer monitor. The service was wildly expensive, but for "Flip," as I'll call him, it was well worth it.

I kept Flip happy by answering his calls on half a ring and placing his trades within seconds. Sometimes he'd call a minute before the headline was due and just wait on the phone with me in order to save the half a ring. In a typical trade, ...