I have been thinking about this topic for a couple of days, and the market results so far today (11:00 AM) seem to be giving an answer, so I better start with the question. The stocks I invest in and follow are of the smaller cap variety with little or no news between the quarterly earnings reports. Most of these have been hit hard by the recent market down turn, even though I believe their earnings and/or growth vectors remain intact. The question is: How will the stock prices react if the trends and projections from earlier times (last quarter!) are intact? Will stocks that have fallen 30%, 40%, 50% regain that ground, or does the market think we are in a new world, where even well run financial companies are only worth 3 to 4 times earnings?

The next 3 to 4 weeks will answer the question for the stocks I follow and I will report back the results. I have been waiting patiently over the last few weeks for this time to arrive and to find out if my research and belief in the direction of these companies is justified.

One more note: I take pleasure in reading the comments of the “end of the world” crowd that populate any article about financial companies or housing, primarily on MarketWatch.com. Today, Wells Fargo (WFC: 30.20 0.00 0.00%) comes out with a positive report that lifts the market and this crew is convinced the company cooked the books.

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