My Own Analyst

Great Entry on Quality Growth Story

CHSI was hit hard today on low guidance for 2012.  The numbers monkeys had to ding the stock, but this is a very short-sighted move in my view.  The entire short-fall is related to a huge initiative designed to boost sales over the next two years.

CHSI is entering the big leagues for PBMs after two big acquisitions this year.  I have long followed the company and note a huge step-up in management quality in the past few quarters (EVP and CFO both hired from outside).  The company has a differentiated biz model (transparency, local focus, high service level) that allows it to differentiate itself from the big guys (ESRX, MHS, CVS).   My target a year out is 68 based on 19 PE.  The company's growth has been and should continue to be high as it integrates the recent huge acquistion (which is on track).  I think that the stock has had a huge run and has been vulnerable to profit-taking.  Today's sell-off is not only unwarranted, it's perhaps directionally incorrect.  The company is correct, in my view, that it is set to benefit from a rapidly changing landscape.  It is right to make upfront investments to acommodate growth.

SMCI Trade

Igor asked: 

You opened a short term trade for SMCI yesterday with a stop of 12.75. The stock printed 12.75 this morning and my stop got executed. I know you did not close the trade. Please advise why you don't see the trade closed at this time (maybe I am not setting up my stops properly??)

First, I am sorry you got stopped out.  It's a great reason not to use hard stops (I would NEVER use a hard stop EVER).  When I set the parameters for trade ideas here, I try to create guidelines.  I also try to update along the way, so that it is clear where we stand, especially if there is a change.  In today's case, I noticed what appeared to be an aberrant trade - no more than 800 shares at 10:07 (in the midst of high volatility following "the speech").  I felt like it held the support, but I understand your point of view, as literally it may not have.  Had I felt as though the stop was violated, I would have pointed it out at the time or, perhaps, suggested that I was staying with it.  I am proceeding as though we are still in the trade, and my current recommendation regarding the trade would be to put it on at the closing price if you aren't presently involved.  Targeting 14.75 still...

CRK

While it's not my highest confidence call at all, the sell-off on CRK seems a bit overdone.  I was patient in saying that last week.  Natural gas prices have been weak.  It's hard to believe, but this has gone from 52-week high to 52-week low in just three weeks on no specific news.  Perhaps my 38 target needs to be revised somewhat lower, and perhaps gas prices will stay weak for a while, but the stock is trading below tangible book value and also has a higher reserve value in my view than the current enterprise value. 

A Look at Homebuilders

Here is a link to the TradeKing blog post:

 

 

http://community.tradeking.com/members/tk-all-star/blogs/84179-time-to-get-into-housing-stocks-on-the-ground-floor

New ST Trade

While I have changed my m.o. on these short-term trades, I see another: EZPW, trading near 30.  29 stop, 33 target...

 

Note:  I was typing near the open on this trade, when the stock opened near 30, but it has jumped up to 30.70.  I like the  entry below 30.75.  I am tightening my stop-loss to 29.50

HAYN: Boeing Implications

When people talk about the strong commercial aerospace cycle, they are usually referring to the new wide bodied planes, like the 787.  It's important to remember that narrow body demand remains quite strong.  BA today shared some updated production schedules that indicate solid growth in the 737 (31.5 planes per week today to 42 in 2014).  HAYN should benefit due to its high exposure to engine production.  I like their other businesses too.  This one is harder to justify from a valuation perspective.  I tend to expect that they can do $8 per share by 2014 - this should translate into at least an $80 stock by the end of 2013.  Sounds great, but the compound growth is about 17% over the next 2 1/2 years, which could end up being just a market return or slightly better.  Still, maybe 80 is too conservative.

Energy Sell is Done

I have flipped to neutral on the Energy sector.  I continue to prefer the large integrated companies and remain somewhat negative on the price of oil, but the stock correction appears over.  I published a piece on TradeKing with 14 names that are screening well:

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5 Watchlist Names with Momentum and Reasonable Valuation

Tradeking Post - Tickers include ALGT, INTC, JNJ, PLXS and ZMH

 

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Energy Stocks - TradeKing Article

I shared my negative short-term Energy views with TradeKing (CRR and LUFK highlighted)

OMG in Barron's

If you subscribe to Barron's (or maybe it's available to the public), there was an article that discussed Battery Technology, suggesting OMG as the best domestic play on electric vehicles.  The article discussed the recent weakness being a function of weak cobalt prices (down to 16 per lb from 19 lately).  One thing the article confirmed was my observation that its warchest of cash is almost all off-shore, so we shouldn't count on a large share repurchase or dividend.

 

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