Goldman: Buy these 5 stocks before earnings

Published Thu, Apr 9 20152:56 PM EDT

Are you ready for the trading sprint that is earnings season? Goldman Sachs is, but what else would you expect from the Wall Street bank considered to have the best trading acumen? The firm sent a report to clients Thursday with the 25 trades they should make as first-quarter earnings hit the tape over the next month. The central theme was that poor economic data, falling oil prices and the rising dollar caused the typical Wall Street analyst to get too bearish on many stocks and so there are great opportunities for an upward earnings surprise. "Based on our conversations, it appears most investors are concerned about downward estimate revisions for U.S. stocks," wrote strategist John Marshall. "Mixed macro data, weather, USD strength (exporters), oil prices (energy), persistently low rates (financials) all have the potential to pressure earnings and guidance. While we share these concerns, we see the potential for shares to rally if earnings/guidance is better than feared." CNBC Pro highlights five of the trades below. Goldman compiled its list by concentrating on names where its individual analysts have much more positive EPS estimates than the rest of the Street. After discussing these stocks with the individual analysts, the firm centered on the ones where they had the highest conviction of an upside move in the name. 1. TJX Companies : TJX earnings should come in 2 percent higher than consensus when the retailer reports mid-May, driving the shares higher. From the note: "Near-term, lower fuel prices should support a constructive spending environment and TJX should be a beneficiary of West Coast port issues, helping to offset FX headwinds." 2. Valero : The refiner's stock should rally by almost 30 percent over the next 12 months as earnings top expectations, according to Goldman. Valero reports first-quarter results April 28. "VLO is the top pick from his (the energy analyst) coverage given (1) his preference for Gulf Coast refining given potential for increasing crude inventories in the region, (2) increased capex discipline and capital allocation potential, (3) growth at the company's midstream segment, and (4) potential upside to near-term consensus." Read More Stick with biotech? 5 trades for the rest of 2015 3. Apple : The world's most valuable stock is a buy before Apple reports earnings on April 27, according to Goldman. Goldman's technology analyst, Bill Shope, "notes that with higher-than-expected iPhone sales and recent EPS and operating cash flow numbers beating estimates, the bull case for the stock remains strong." 4. Amazon : Amazon's cash flow (what the company trades on rather than EPS) should come in 8 percent higher than consensus Street estimates, according to Goldman. "Capex invested by Amazon over the last four quarters—62 percent above the prior three-year average—will pay off in the form of higher levels of sustained growth from faster delivery, broader selection, and cloud services." 5. LinkedIn : The social network, which Thursday said it would buy online-education company Lynda.com , should rise 23 percent over the next 12 months, according to Goldman. Here's why it's a buy before earnings come out April 30: Goldman Internet analyst Heath Terry "believes LinkedIn has the highest potential for upward revisions to growth within his coverage. The company should benefit from a new product cycle in Sales Navigator, the impact of the Bizo acquisition on the monetization of LinkedIn's advertising inventory, the development of off-platform ad revenue, and sustained high levels of growth in the Recruiter business." The money play: Goldman believes buying call options is the best way to capitalize on these earnings beats. "Broadly, we continue to focus on call buying opportunities as we estimate call buying has been the most profitable earnings trade on average over the past 19 years and in each of the past two quarters," wrote strategist John Marshall. Whatever way you do it, be ready for a wild ride. Goldman shows that the average stock moved almost 4 percent on the day of its earnings release last quarter, three times the 10-year average.

The Goldman Sachs booth at the New York Stock Exchange.

Adam Jeffery | CNBC

Are you ready for the trading sprint that is earnings season?

Goldman Sachs is, but what else would you expect from the Wall Street bank considered to have the best trading acumen? The firm sent a report to clients Thursday with the 25 trades they should make as first-quarter earnings hit the tape over the next month.

The central theme was that poor economic data, falling oil prices and the rising dollar caused the typical Wall Street analyst to get too bearish on many stocks and so there are great opportunities for an upward earnings surprise.

"Based on our conversations, it appears most investors are concerned about downward estimate revisions for U.S. stocks," wrote strategist John Marshall. "Mixed macro data, weather, USD strength (exporters), oil prices (energy), persistently low rates (financials) all have the potential to pressure earnings and guidance. While we share these concerns, we see the potential for shares to rally if earnings/guidance is better than feared."

CNBC Pro highlights five of the trades below.