Third quarter S&P 500 earnings results for the first three weeks of the season continue running far ahead of Street estimates. Importantly, however, recent weakness in some economic data has overshadowed the better-than-expected earnings and caused stock prices to fall sharply.

Third quarter S&P 500 earnings results for the first two weeks of the season are running far ahead of Street estimates. Importantly, sales are also faring much better than expected. Here's a short breakdown of the results thus far for the S&P 500 companies:

Earnings Reported through Friday

Positive Surprises: 146
Negative Surprises: 25
% Positive Surprises: 85%
Year over Year earnings growth for reporting companies: -14%

John Burr Williams is widely credited as being the father of dividend investing and the creator of the forerunner of today's dividend discount models. Williams was also a first rate economic strategist.

Next week 3rd quarter corporate earnings reports will begin in earnest. We project that this quarter's earnings will, again, beat expectations by a wider margin than is now anticipated by most investors. We said the same thing just prior to second quarter releases and the earnings results even outdid our best guesses as 75% of S&P 500 companies beat their Wall Street estimates.

I recently completed a simple analysis of the S&P 500 that argues strongly for a shift in leadership in the market. I computed the 6-month total returns of all stocks in the S&P 500 and then compared the top 250 performers with the bottom 250. Here are my findings.


Performance Metrics

We like foreign stocks. They have been outperforming domestic stocks since March, and we think they will continue to do so. Here are three reasons:

I read article after article about dividend investing and, in many cases, I hope that no one is really following the suggestions being made. The reason for my concern is that I have tried about every form of dividend investing known to man, including dividend capture strategies, since I became a dividend investor in the late 1980s, and I have found that there is no single strategy that assures success.

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Randy Alsman is Vice-President, Portfolio Manager, and a member of Donaldson Capital Management's Investment Policy committee.