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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, Friday, May 11, 2018, I bought GDOT, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Two days ago, Wednesday, May 9, the company announced results for the quarter ended March 31. Earnings came in at $1.40 per diluted share (vs $1.00 last year and analysts' consensus $1.29). Revenue was up 25% to $315.0 million (analysts' consensus $297.4 million).
+ A "true surprise"*: For more than two months prior to the news, the stock was trading mostly sideways or edging lower. Then, yesterday, it jumped +14.6% 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: Yesterday's price move represents a breakout from an 11-week 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.
+ The stock is down slightly this morning. I view 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: +28%, +31%, +31%, and, most recently, as cited above, +25%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
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 Mar 18 vs Mar 17: $1.40 vs $1.00
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $2.87, revised upward from $2.59 90 days ago (and up from 2017 actual earnings of $2.16); and the consensus estimate for 2019 is $3.26, revised upward from $2.97 90 days ago.
+ Valuation: At 22 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 4c above estimates in each of the past seven quarters, including the just-reported quarter cited above, which "beat the Street" by 11c.
+ 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 ("Finance - Credit Card / Payment Processing") is ranked #50 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, Friday, May 11, 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, May 11, 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, May 11, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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