These contrarian trades could be big winners during earnings season, Goldman says

Published Sun, Apr 17 20229:24 AM EDTUpdated Sun, Apr 17 20229:25 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Earnings season is heating up, and that can mean big swings for individual stocks as the results roll in. The fresh batch of corporate updates comes after a choppy quarter for stocks marked by macro concerns, such as inflation and the war in Ukraine. The derivative research team at Goldman Sachs, led by John Marshall, said in a note to clients last week that investors seem to preparing for the worst from company reports. "Positioning in the single stock options markets shows that investors are unusually fearful ahead of earnings. Large shocks to the macro environment over the past three months (US Rates, Ukraine, Commodities) have driven factor rotations to an all-time high, exacerbating the volatility felt by long-short equity investors," Marshall wrote. That defensive stance means that investors could be extra willing to jump in if a company beats expectations. "Each of the models included in this report suggests elevated potential for upside in S & P 500 stocks over the next three months. We leverage our equity analysts' fresh estimates and qualitative comments to identify the 25 most out-of-consensus opportunities from our Americas coverage," Marshall wrote. Here are some of the stocks where Goldman analysts are unusually bullish ahead of earnings and where the options market implies higher-than-normal volatility. Source: Goldman Sachs One name on the list has already been a red hot stock this year. Shares of Cenovus Energy have jumped more than 40% in 2022 as oil prices have climbed above $100 per barrel. The company is scheduled to release its first-quarter results on April 27. A stock on the list that has gone the opposite direction is vaccine maker Moderna . The successful Covid vaccine proved that the company's development platform was viable, but investors seem unsure how to value the company. The stock is down more than 30% year to date and nowhere near its peak from last September. Moderna has an annual meeting of shareholders set for April 28, followed by an earnings call on May 4. Walmart and Datadog , meanwhile, appear on the list above and also appear on Goldman's conviction list, meaning that the stocks are among its analysts' top investment ideas. Walmart is scheduled to report on May 17, while Datadog has not set its date yet but is likely to report in May as well. For these stocks, investors can minimize their risk from a potentially bad earnings report by purchasing call options. Calls serve as a bet that a stock will rise above a set strike price before a certain date by letting the holder of the option purchase the stock at that price, regardless of how high it has climbed. If the stock falls instead, then the investor only loses the premium paid for the options contract. There are also some companies where Goldman analysts are more bearish than consensus. For these stocks, investors can take advantage by purchasing put options, which serve as bets that a stock will fall below a set strike price. Two of the names where Goldman sees a likely earnings miss are First Solar and Intel . Those companies are both set to report on April 28. — CNBC's Michael Bloom contributed to this report.

A customer pushes her shopping cart through the aisles at a Walmart store in the Porter Ranch section of Los Angeles.

Kevork Djansezian | Reuters

Earnings season is heating up, and that can mean big swings for individual stocks as the results roll in.