It’s been a tough week for stocks as investors adjust to the reality that the Federal Reserve won’t be providing any more liquidity to the U.S. economy. Get ready for more tough weeks ahead, too — earnings season is about to get underway and companies look poised to deliver earnings that range from so-so to disappointing. That’s because Europe remains in a weak condition, and Asia isn’t looking much better, either.

As an example, technology firm Polycom (Nasdaq: PLCM) just slashed its first-quarter guidance, noting that sales in Asia will grow less than 10% from a year ago, well below recent 15% to 25% year-over-year growth rates. In the United States, Polycom now expects sales to rise just 1% to 3% from a year ago. That shortfall led to a quick 20% beat-down in the stock.

 
I hold a similarly cautious view. As I’ll note in a moment, there will be a few quarterly shortfalls in my $100,00 Real-Money Portfolio as well, though that won’t lead me to make any moves, as these stocks already trade at deep-value levels. The key takeaway: these stocks could see renewed near-term selling pressure, but still look poised to post solid gains for the next 1-2 years.

Here’s a quick preview of two key portfolio holdings. (I will help set expectations for other holdings in the portfolio as earnings season progresses.)

Alcoa (NYSE: AA)
This aluminum producer looks set to kick off earnings season next Tuesday, April 10, on a sour note. Analysts expect the company to lose a nickel a share, before turning a $0.12 a share profit in the current quarter. Both of those views now look too optimistic. That’s because aluminum prices have fallen nearly every day for two straight weeks. As of Thursday, April 4, aluminum sold for $0.93 per pound on the spot market, which is a 10% drop in the past month.

I’m concerned that the consensus forecast for the first quarter doesn’t fully account for weak industry conditions in March. And I simply can’t see how Alcoa can earn the $0.12 a share that analyst expect in the current quarter.

 

In hindsight, I am glad I locked in some small gains in mid-March when I sold half of my position in Alcoa.

And here’s the strange thing… If Alcoa’s results are as bad as I fear, then I’d likely buy more stock. That’s because the stock will no longer be vulnerable to unrealistic future expectations, and more importantly, could create a better backdrop for the company.

Recall that Alcoa is the lowest-cost producer in the industry. Aluminum at $0.93 per pound causes Alcoa to report a GAAP loss, but still generate a modestly positive operating cash flow. But at that price, many of Alcoa’s rivals are flat out losing money. Low aluminum prices will lead some of these firms to follow Alcoa’s lead by shutting capacity. This should cause prices to firm later this year, and perhaps much better pricing in 2013 as the global economy picks up steam. That’s why I remain a long-term bull on Alcoa.

Ford (NYSE: F)
Domestic auto sales have been trending better than most expected just three months ago, which should have enabled Ford to meet or exceed first-quarter consensus estimates. But the automaker may in fact trail profit forecasts, earning up to a nickel less than the $0.38 earnings per share (EPS) consensus. I take that view after parsing through Ford management’s comments regarding current business trends at this week’s New York Auto Show .

The key negatives:

• Ford’s Latin American division likely lost even more money in the first quarter than it did in the fourth quarter of 2011. That region has seen slowing growth, especially in Brazil, so dealers were stuck with high inventories that need to be drawn down.

• Europe has not gotten any better, and management guides for a similar sequential loss as was seen in the fourth quarter. (Notably, management thinks European results will markedly improve later this year on the heels of a product cycle refresh.)

• Ford underestimated the strength of the U.S. market and didn’t build enough of the most popular vehicles. The good news is that scarcity brings firm pricing, and Ford points to better-than-expected profit margin trends in North America. Ford will be sharply boosting production this summer to regain any lost market share.

Still, this is a company on a clear upward long-term trajectory. It’s crucial that you not lose sight of the fact that Ford now has the best management team in the business, an extremely competitive line-up of cars and trucks, a balance sheet that has never been this strong, and major operating leverage to meet the rising auto sales expected in the next few years.

Despite the first-quarter shortfall, the outlook for the rest of 2012 is strong enough that full-year EPS consensus forecasts of around $1.50 a share — an 8% gain — still look quite attainable. And if Europe and Latin America stabilize in 2013, then Ford could easily earn $2 a share or more — compared to the current $1.70 a share consensus. Simply put, you need to sit tight on a stock that has that kind of earnings potential yet trades for just $12.50 (a forward P/E of about 6).

Risks to Consider: Spain and Italy are showing troubling signs in recent days as bond yields move up, so the “stabilizing Europe” thesis for 2013 may not come to pass, hurting both Alcoa and Ford along with many other U.S. multinationals.

Action to Take –> You shouldn’t be too concerned about deep value stocks like Alcoa and Ford as we head into a tricky earnings season, but you do need to assess the wisdom of some of your more richly-valued holdings.