Don’t be afraid to trust in your own ideas. Thankfully, we have numerous resources at our disposal to do our own research and make our own decisions. And technology helps us be more efficient, and more informed. This leads to more money.
Stocks I’m watching this week include: WAB, NSR, REGN and LNKD. This is a bit of a catch-up post since I missed writing on Friday, so I appologize about the length. Not often I have to say that.
First is WAB. WAB makes components for trains, particularly breaking and safety components. It’s not only an economic rebound play, it’s also a secular growth story, which is what I like to look for the most in a stock.
Partly because of the horrendous train accident that occurred in Chatsworth (a suburb in the city of Los Angeles), our government cracked down on the industry and has increased safety standards for trains.
I’m quite grateful for these new standards, largely because I take the train into downtown LA for Clippers games often, but also because it’s pumping up the long-term bottom line for WAB.
WAB stands to gain from these new rules and has quite a back-log of business. It features most of the solid fundamentals a winning stock should like high EPS ratings, ROE, five quarters in a row of EPS growth of over 40% with sales growth over 25% and EPS growth estimates of 39% for the year.
The industry group’s a bit in the toilet, which is a downer, yet WAB’s stock chart is sitting in a nice looking cup with handle pattern, the buy point of which is indicated by the green arrow ($82.16). I’m waiting to see if it breaks out above this price on volume that is 50% higher than average.
NSR is also from a mediocre industry group (in terms of price performance), but it sports terrific EPS growth and top-notch fundamentals. It has a 96 EPS rating according to IBD and a 99 composite rating, the best possible.
NSR provides database infrastructure services and network management for telecom and enterprise markets. I haven’t completed my full research on it but it’s worth paying attention to and studying given its numbers and action.
NSR’s base is a bit tricky to read. The current cup pattern formed after what could be interpreted as a first stage base as it undercut a previous cup with handle base that went nowhere (to the left on the chart). Or perhaps it’s just a lopsided double bottom base? I prefer to see it as a new base forming. There is substantial buying going on as indicated (not shown in this chart) by the buying seen on a weekly chart. As many as 6 weeks of accumulation vs one down week shows strength, as does the 2.0 up down ratio. Both of these indications are secondary indicators, but are helpful to see. The 50 day line (the red line) is under the 200 day line (the white line), which I don’t usually like to see, and the relative strength line, while a strong 83 (I usually don’t consider a stock unless it’s 80 or higher) is below previous highs. I’d prefer seeing the RS line approaching new highs or in new high territory before a break out.
Additionally, the stock may be interpreted as having broken out of a handle already. The break out happened on low volume, but volume did come in later. The arrow to the right indicates the possible handle buy point. The green arrow in the middle suggests an alternate buy point, which is the left side high of the current pattern. Please pardon the brief and slightly lacking description of the stock and chart, I admit I’m rushing this a bit (I’d like to go to sleep – how the heck does Cramer function on like no sleep!).
REGN is a biomed stock that already broke out last Thursday, but it’s still within the 5% rule – so it’s in buy range. It broke out on volume that was 74% higher than average, just what you like to see. REGN is quite the interesting stock. It’s taken off the past year, having risen from its previous breakout level of $80 to today’s $145.09 since January.
More significantly, the company hasn’t produced a profit in years, but it’s finally turning things around. The past two quarters’ EPS growth has been over 200%, with sales just over 100% and nearly 200%. Growth looks to continue. It seems the smart money knew this ahead of time, which speaks to the dramatic rise in the stock price prior to registering the recent superb growth. Fund ownership has grown from 358 funds owning the stock to 536 in the most recent quarter.
I’m behind on my full research of this stock, but my cursory analysis has kept my interest.
This post’s final entry is my attempt to make amends with the social marketing space that I have so maligned through my Facebook bashing. If you like Facebook, skip it for now and consider LNKD. Now this is a solid company.
While its stock chart is a bit choppy of late, it still qualifies as a cup with handle pattern with a potential buy point of $113.10, which is the high of the current handle. The handle has formed in bone-dry volume, a great sign.
LNKD has fantastic fundamentals, really the kind I like to see. Two of the past three quarters, LNKD has delivered EPS growth over 100%, with next quarter’s EPS growth estimated to be 133% and next quarter’s sales growth estimated to be 74%. This year’s growth is estimated to be 80% while next year’s EPS growth is estimated to be 108%. When in doubt, go with the stock that shows the highest growth.
While it is a secondary indicator, fund support is superior. This is perhaps my favorite of the secondary indicators. The number of funds owning the stock has risen from 185 a year ago to 543 the most quarter reported. LNKD’s group is also fairly hot, with an 88 relative strength rating. Group mates include BCOR, ACOM and IACI, each worthwhile stocks in their own right.
LNKD seems to be succeeding precisely where FB is failing. LNKD certainly makes money from advertising on its website, as FB does, but it has diversified its business far better, in my estimation, than FB has. Most of LNKD’s revenue is derived from fees, not just advertising.
And grow it has. LNKD had over 100% growth in its hiring solutions segment, despite a fairly terrible hiring environment in this economy, especially in Europe. This is the definition of secular growth. Imagine what happens when the economy actually picks up.
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