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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, Wednesday, May 9, 2018, I bought PVAC, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Yesterday, May 8, after the close, the company announced results for the quarter ended March 31. Earnings came in at $1.48 per diluted share (vs $0.59 last year and analysts' consensus $1.01). Revenue was up 121% to $77.2 million (analysts' consensus $66.7 million).
+ A "true surprise"*: For three weeks prior to the news, the stock was trading in a tight range. Today, it is soaring, up +31% as I write this, 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: Today's price move represents a breakout from a 16-month range to a new all-time high
+ Volume spike, mostly on the buy side: Today's volume is more than 4x average, and sets a 10-month record.
+ Three months of accelerating sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -2%, +4%, +66%, and, most recently, as cited above, +121%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 17 vs Jun 16: $0.66 vs ($3.99) Sep 17 vs Sep 16: $0.57 vs $0.09 Dec 17 vs Dec 16: $1.06 vs $0.71 Mar 18 vs Mar 17: $1.48 vs $0.59
+ Valuation: At 6.3 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 10%, the stock may still be, even after today's price jump, attractively priced.
+ History of earnings surprises: This company has reported earnings-per-share at least 7c above estimates in each of the past five quarters, including the just-reported quarter cited above, which "beat the Street" by 59c.
+ The company's industry group ("Oil & Gas - US Exploration & Production") is ranked #8 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 the stock in spite of the following negative factor:
- Strong but falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $6.86, revised downward from $7.48 90 days ago (but up from 2017 actual earnings of $2.88); and the consensus estimate for 2019 is $9.87, revised downward from $10.67 90 days ago.
-KD, Wednesday, May 9, 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, Wednesday, May 9, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for PVAC. We remain fully invested.
-KD, Wednesday, May 9, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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