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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, Friday, February 23, 2018, I bought GDOT, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Yesterday, Feb 22, before the open, the company announced results for the quarter ended Dec 31. Earnings came in at 29c per diluted share (vs 19c last year and analysts' consensus 25c). Revenue was up 31% to $213.0 million (analysts' consensus $206.1 million).
+ A "true surprise"*: Prior to the news, the stock had been trading in a sideways pattern for six months. Then, yesterday, it shot up 10% 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: The price movement yesterday represents a breakout from a 7-year range to a new all-time high.
+ Volume spike, mostly on the buy side: Yesterday's volume was more than 4x average, and set a 12-month record.
+ At the time I bought, shortly after the opening bell this morning, the stock price was down a little. I viewed this as a buying opportunity.
+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +11%, +28%, +31%, and, most recently, as cited above, +31%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Mar 17 vs Mar 16: $1.00 vs $0.78 Jun 17 vs Jun 16: $0.55 vs $0.27 Sep 17 vs Sep 16: $0.34 vs $0.21 Dec 17 vs Dec 16: $0.29 vs $0.19
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $2.83, revised upward from $2.50 90 days ago (and up from 2017 actual earnings of $2.16); and the consensus estimate for 2019 is $3.25, revised upward from $2.84 90 days ago.
+ Valuation: At 20 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 30%, the stock may still be, even after yesterday's price jump, attractively priced.
+ History of earnings surprises: This company has reported earnings-per-share at least 3c above estimates in each of the past eight quarters, including the just-reported quarter cited above, which "beat the Street" by 4c.
+ The company's industry group ("Finance - Credit Card Payment Processing") is ranked #27 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.
-KD, Friday, February 23, 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, Friday, February 23, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for GDOT. We remain fully invested.
-KD, Friday, February 23, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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