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Market Stance: BULLISH (since April 10, 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, Monday, May 7, 2018, I bought NANO, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Last Tuesday, May 1, after the close, the company announced results for the quarter ended March 31. Earnings came in at 67c per diluted share (vs 19c last year and analysts' consensus 44c). Revenue was up 39% to $82.3 million (analysts' consensus $72.3 million).
+ A "true surprise"*: For more than a month prior to the news, the stock price had been trending lower. Then, on May 2, after the news came out, it jumped +29% 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: Last Wednesday's move was a breakout from a 12-month range to a new 16-year high.
+ Huge volume spike, mostly on the buy side: Last Wednesday's volume was more than 100x average, and not only set a 12-month record, it more than doubled the prior 12-month record.
+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +16%, -3%, +32%, and, most recently, as cited above, +39%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 17 vs Jun 16: 30c vs 26c Sep 17 vs Sep 16: 22c vs 33c Dec 17 vs Dec 16: 53c vs 33c Mar 18 vs Mar 17: 67c vs 19c
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $1.69, revised upward from $1.62 90 days ago (and up from 2017 actual earnings of $1.23); and the consensus estimate for 2019 is $1.94, revised upward from $1.40 90 days ago.
Valuation: At 15 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 12%, the stock is, by my usual metric, reasonably priced.
+ 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 23c.
+ 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 - Semiconductor Eqp") is ranked #150 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 months.
-KD, Monday, May 7, 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, Monday, May 7, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for NANO. We remain fully invested.
-KD, Monday, May 7, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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