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Market Stance: BEARISH (since February 2, 2018)
* An average of managed accounts, net after all commissions and fees.
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* Buy prices shown are net after commissions and fees.
Today, Thursday, February 15, 2018, I bought SEDG, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Yesterday, Feb 14, after the close, the company announced results for the quarter ended Dec 31. Earnings came in at 85c per diluted share (vs 32c last year and analysts' consensus 65c). Revenue was up 70% to $189.3 million.
+ Breakout: The stock is up sharply this morning, breaking out of a 32-month range to a new all0time high.
+ Volume spike, mostly on the buy side: Volume is more than 4x the daily average, and, just 4 hours after the open, has already set a 6-month record.
+ Three quarters of excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -8%, +9%, +30%, and, most recently, for the quarter ended Dec 31, +70% to $189.3 million.
+ Three quarters of excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Mar 17 vs Mar 16: 36c vs 51c Jun 17 vs Jun 16: 55c vs 44c Sep 17 vs Sep 16: 66c vs 46c Dec 17 vs Dec 16: 85c vs 32c
+ History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 20c.
+ The company's industry group ("Energy - Solar") is ranked #32 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising over recent weeks and months.
+ The stock's 200-day moving average is rising, indicating a long-term uptrend.
I chose to buy this stock in spite of the following negative factors:
- Weak and falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $2.12, revised downward from $2.20 90 days ago (and down from 2017 actual earnings of $2.43); and the consensus estimate for 2019 is $1.99, unchanged from 90 days ago. (This data pre-dates yesterday's surprise.)
- Analysts, prior to yesterday's earnings surprise, project negative earnings growth over the next five years.
-KD, Thursday, February 15, 2018
* Buy and sell prices shown are net after commissions and fees. This means that the gain/loss shown is also net after transaction expenses.
Today, Thursday, February 15, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for SEDG. We remain fully invested.
-KD, Thursday, February 15, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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