My Own Analyst

VRNG Update

I posted somewhat negatively after quickly interpreting the MSFT settlement.  I am disappointed, but it doesn't change the story.  It just didn't make sense to rally on it.  The stock is being added to the Russell 2000 next month, which is worth a little.  The big story remains the running royalty award, which has taken forever but will be here eventually.  No doubt, GOOG will file an appeal, but if it plays out as I expect, the stock will go higher.  I think it could pop to as high as 5 and then settle in at 4 area.  So, I like it here near 3.  There are better and worse scenarios.  My worst-case is $1.50, and the better scenarios would be surprises in the size of the royalty.  Such a gamblers's stock...

Earnings Reports

Last night, ESL missed and lowered guidance for the year.  I think the stock is somewhat cheap, especially considering that there is an activist involved.  We sold the stock three months ago in Top 20 at 69 area.  I see technical support at 68.50.  My one-year target is likely going to drop slightly from 90.50.

CPRT is on my watchlist - it has been so expensive I haven't been focused.  They had a pretty big miss that they attributed to Sandy.  They also announced an acquisition.  My target here is just 38, so I am not interested.  The stock has been bid up on possible conversion to a REIT, which I don't expect to happen.  It is a well-managed company, and my client owns it.

VRNG

They signed a deal with MSFT for $1mm plus 5% of GOOG proceeds.  I would sell into the strength (3.39) - this isn't a good deal.  This is not as good as many hoped (an independent settlement).  GOOG will delay and delay - quicker cash would have been better.  I would be a buyer closer to 3 as we await the judge's ruling on future royalties.  I do still think it has a shot at 5.

Early News

Not much going on...

VOLC was upgraded by JMP to Buy with a target of 26.  I lowered my target to 26 after the last report and base it on 3.3X Enterprise Value to Sales.  I was previously using 4X, but their growth prospects seem more like 15% rather than 20%.  I like the stock fundamentally for the longer-term, and it looks like it may have a bottom near 16.

STJ was removed from the short-term buy list by Deutsche Bank.

Piper Jaffray said that the addition of capacity in the Redbox kiosks (80 discs) could add $1.11 to 2014 EPS.  They kept their CSTR target at $65.  I like the $100 target better!  Mine is 81

CSTR Target to 100

B. Riley raised the target price on CSTR to 100 from 80 based on a company presentation and an expectation of initiatives driving more H2 growth.

CHS Call Review

The call is still on-going.  I want to get this negative out of the way as prepared remarks have ended:  May is weak.  Sales are up only 1% so far.

There were so many positives, but the quarter, although a "record' was really hurt by primarily weather.  The real issue was just its Chico's brand - Soma did well.  Spring is a big season for CHS, and their shopper wasn't buying shorts, halter tops, etc.  The stock probably won't get to 17.50 - big investors will be happy that they took the pain this quarter (inventory control).

This begs the question of ANN.  My guess is that we lose that trade today  (29.69 stop), even if it doesn't necessarily make sense.  Guilt by association, though I think ANN has less exposure to shorts and warm-weather apparel.  

Back to CHS, I liked everything I heard but the results for Q1 (Boston Proper, social media, technology driving bras and other products, Canada for wh|bm).  I don't think it's right to be negative about the rest of the year based on this quarter and the slow start to Q2.  

CHS Q1 A Stinker

So much for a great chart, good valuation and solid fundamentals, as none of that kept CHS from experiencing a horrible Q1.  Sales of 671mm were up 3% from  a year ago on flat same-store sales and  missed the consensus by over 5%, while EPS of .32 fell short by 11% and were flat from a year ago.  The company blamed the  "unusually cool spring" and the 9.6% comparables from a  year ago.

 Looking at the details, Chico's/Soma fell 2.8% on a comparable basis, while White House | Black Market rose a healty 6.4%.  Encouragingly, inventory seems under control, rising just 2.3% on a per-square-foot basis.  Some might look at the overall increase of 13.9% with alarm (9% adjusted for the 53rd selling week a year ago), but the company has grown square footage by 9% over the past year.

The company paid 17.64 for 3.4mm shares during the quarter and will likely continue to deploy its excess cash.

This isn't the first time CHS has missed in the past few years, and the company has always bounced back quickly.  Unfortunately, the bounce will probably start much lower than than the close, most likely 17-17.5.  Hard to believe the stock was pressing 20 just a few days ago.  In retrospect, the "breakout" lacked volume.  I'll listen to what they have to say, but I understand that retail fluctuates.  To me, anything below 18 looks really good.  I might have to knock my target down from 26 back to 25 or maybe even 24.

Pre-Market News

The market is up this morning.  I see SPY resistance 167-.10-167.75.  Clearing that band would likely suggest that the reversal pattern won't hold.  It's early and thin - not reading too much into it.

STJ was downgraded to sell by Cannacord.  Their target remains 35.

MAKO was upgraded to Buy by Wells, Fargo with the price hiked substantiall (11-12 goes to 15-17).  The upgrade is driven by their belief that new hip software will drive procedure growth and that hips are actually a bigger opportunity than knees. (THIS IS A BIG UPGRADE).

Weekend Update - Reversal Edition

The mid-week reversal was powerful, and the action that followed indicated that it was real, as the market struggled over the next couple of days going into the long weekend.  Tuesday was the 18th straight rise on a Tuesday in the DJIA - crazy!  Again, I am looking for 1600, with a drop into the 1530-1570 range quite possible.  If Wednesday's intraday high proves to be the interim peak, it is the latest of the past four years, when the three other tops were between early April and early May.  2010 and 2011 saw very large corrections that suggested possible bear markets, while 2012 was more modest.  At 1530, the retreat would be less than 10%.  We'll see how it plays out, but looking at bonds and Japan this week tells me that something is going on.  SPY is .69 overbought, IWM .51, DIA .75 and qqq .44.  If SPY were to get to 0 immediately, it would be a little below 157, so in my range.  As time passes, the zero number would rise a bit.  On my weekly information, SPY bottomed in 2010 at about -1.3, in 2011 at -2.0 and in 2012 at about -0.9.   In the last few years, it has peaked near 1.0, just like this year.  A move to -1.0 would be 145.

Looking at the watchlist ( Download Watchlist052413 ), 36 of the 100 closed above 10dma, a nice retreat from high levels the past few weeks.  Stocks offering 35% or more gained EOG and lost PBI.The others are ANV (who knows?), VOLC and BCEI (both of which are intersting to me).

10% movers included SCVL to the upside on earnings and TITN and SWI to the downside on a pre-announcement for TITN and the dilutive deal for SWI.  Black 1s dropped one (ADBE) but are still at 16.  I have failed so far, but attacking these black 1s is the right game-plan.  The two black 5s remain:  ANV and NEM.  ANV is -3.3.  VOLC is -2.36 and SWI is -2.61 (but this is a little exaggerated since it doesn't yet have 5 years of trading history).  NEM and TITN are the only others more than a unit oversold.  Looking at names on my "prospects", EW at -2.26 is interesting.  AGN is -1.45, and the buy of B&L buy VRX could get some interest there (not sure).  VMW and CTXS are both -1.13.  

Looking at positions in the models ( Download Positionwatch052413 ), I lowered the target on  TITN and increased it on SCVL (PE and earnings) and MW.  OMI too (a bit of a stretch there, as I am now using 20PE).

Reporting this week:  UNFI on Tuesday, CHS on Wednesday and CPRT and ESL on Thursday

Whoops!

Scratch that last post - it's a negative for ABX, as Chile has blocked a project.  ANV is all domestic, something the market doesn't appreciate.  Peru has been giving NEM problems...