The elusive “Whispered Numbers”

Whisper numbers are the unofficial and often undisclosed estimates of a company’s earnings per share (EPS) that circulate among investment professionals. Here’s a deeper dive into what they are, their uses, and how reliable they can be:

  • Unofficial and Unreleased: In contrast to the official consensus estimates published by services like First Call, whisper numbers are not derived through a formal process. They are based on private information, educated guesses, and rumors circulating within the financial world.
  • Used for Gauging Market Expectations: Investors and traders use whisper numbers to get a sense of the market’s true expectations for a company’s earnings performance. The logic is that analysts might adjust their official forecasts to be more conservative, whereas the whisper number reflects a more realistic expectation of the company’s actual results.
  • Obtaining Whisper Numbers: Whisper numbers are not readily available to the public. They are typically circulated among hedge funds, institutional investors, and professional traders with connections on Wall Street. Some financial websites and services aggregate and publish whisper numbers, but the accuracy of these can vary.
  • Reliability: A Mixed Bag: The reliability of whisper numbers is a subject of debate. Some studies suggest they can be more accurate than consensus estimates in predicting a company’s earnings. However, whisper numbers can also be based on speculation and misinformation, leading to inaccurate predictions.

Here are some additional points to consider:

  • Market Impact: If the actual earnings report deviates significantly from the whisper number, it can cause a sudden and substantial shift in the stock price.
  • Ethical Concerns: The use of whisper numbers raises ethical concerns, as some argue it gives an unfair advantage to those with access to this information.
  • Alternative Sources: Investors can consider other sources to gauge market sentiment, such as options trading activity or social media discussions (though caution is advised with the latter).

Overall, whisper numbers can be a valuable tool for experienced investors, but it’s crucial to understand their limitations. They should be used in conjunction with other forms of analysis and not be considered a guaranteed prediction of a company’s earnings.

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