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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 22, 2018, I bought VPG, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Yesterday, before the open, the company announced results for the quarter ended Dec 31. Earnings came in at 50c per diluted share (vs 26c last year and analysts' consensus 31c). Revenue was up 24% to $69.4 million (analysts' consensus $63.9 million).
+ A "true surprise"*: Prior to the news, the stock was trading near the low end of its 3-month range. Then, yesterday, it jumped +11.9% on extremely heavy volume.
* "True surprise" is my term to describe a company news item that ignites heavy buying and that was not preceded by a short-term run-up in the stock price (i.e. not preceded by rumor).
+ Breakout: This morning, the stock is up again, now breaking out of a 3-month range to a new all-time high
+ Volume spike, mostly on the buy side: Yesterday's volume was more than 4 times average, and set a 12-month record.
+ Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +6%, +7%, +15%, and, most recently, as cited above, +24%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Mar 17 vs Mar 16: 19c vs 13c Jun 17 vs Jun 16: 29c vs 15c Sep 17 vs Sep 16: 27c vs 21c Dec 17 vs Dec 16: 50c vs 26c
+ Strong rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $1.30, unchanged from 90 days ago (and up from 2017 actual earnings of $1.25); and the consensus estimate for 2019 is $1.56, unchanged from 90 days ago.
Valuation: At 19 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 16%, the stock is, by my usual metric, priced within reason.
+ History of earnings surprises: This company has reported earnings-per-share at least a penny above estimates in each of the past three quarters, including the just-reported quarter cited above, which "beat the Street" by 19c.
+ The stock's 200-day moving average is rising, indicating a long-term uptrend.
I chose to buy the stock in spite of the following negative factor:
- The company's industry group ("Elec - Scientific/Msrng") is ranked #90 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling over recent weeks and months.
-KD, Thursday, February 22, 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 22, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for VPG. We remain fully invested.
-KD, Thursday, February 22, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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