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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 16, 2018, I bought NSIT, for both client and my personal accounts. Here's why I bought this stock:
+ Huge recent earnings surprise: Two weeks ago, May 2, after the close, the company announced results for the quarter ended March 31. Earnings came in at 94c per diluted share (vs 56c last year and analysts' consensus 60c). Revenue was up 19% to $1.76 billion (analysts' consensus $1.53 billion).
+ A "true surprise"*: For more than two months prior to the news, the stock was trading in a tight range. Then, on May 3, after the news, it jumped +12% on huge 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).
+ Two breakouts: That price jump on May 3 was a breakout from a 5-month range. The price continued to climb, and, one week ago, on May 9, it broke out of a 7-month range to a new 12-month high.
Since May 9, the price has come down a bit, below the breakout point. One the one hand, you could say that the second breakout has failed. However, I am viewing this minor dip as a buying opportunity.
+ Volume spike, mostly on the buy side: The trading volume on May 3 was more than 7 times average, and set a 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%, +26%, +22%, and, most recently, as cited above, +19%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 17 vs Jun 16: $1.14 vs $0.97 Sep 17 vs Sep 16: $0.73 vs $0.63 Dec 17 vs Dec 16: $0.81 vs $0.72 Mar 18 vs Mar 17: $0.94 vs $0.56
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $3.96, revised upward from $1.44 90 days ago (and up from 2017 actual earnings of $3.24); and the consensus estimate for 2019 is $4.27, revised upward from $3.51 90 days ago.
Valuation: At 10.7 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 7.4%, the stock is, by my usual metric, is reasonably priced.
+ History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past eight quarters, including the just-reported quarter cited above, which "beat the Street" by 34c.
+ The company's industry group ("Wholesale - Electronics") is ranked #114 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, Wednesday, May 16, 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 16, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for NSIT. We remain fully invested.
-KD, Wednesday, May 16, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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