I’m going to start writing my blog again at moneysuccessfreedom.com, a site for investment research, education, and ideas. I look forward to seeing you there.
To Your Investing Success,
Jonathan
I’m going to start writing my blog again at moneysuccessfreedom.com, a site for investment research, education, and ideas. I look forward to seeing you there.
To Your Investing Success,
Jonathan
Body Central (BODY) is a specialty retailer offering on-trend, quality apparel and accessories at value prices. As of March 8, 2012 the company operated 241 specialty apparel stores with plans of opening 35 additional stores (a 14.5% increase) during 2012. Same store sales grew by 11.3% in 2011 and operating margins increased to 10.6% of net revenue from 8.2% in 2010. In the latest quarter, BODY reported earnings per share grew by 52% to $0.38 year/year, a penny better than analyst estimates, and revenues rose 20% to $80.7 million compared to $79.7 million estimates. The company issued downside revenue guidance for the next fiscal quarter, seeing revenue of $343-348 million versus $354 analyst consensus, citing a softening in sales trend. Management expects to resolve the issue with a fresh product mix. Looking forward, analysts see 24% year/year eps growth for 2012. With a forward price to earnings ratio of 19, resulting in a PEG of 0.79, valuation looks reasonable. Management runs a tight ship with return on equity at 28% in 2011.
Assuming management can address the current quarter’s weakening sales trend and manage the hyper growth in new store openings (management has a solid history of handling operating details), the fundamentals for BODY look bright. Mutual funds agree as the number of funds owning BODY has increased for three quarters in a row as follows: Jun-11 147, Sep-11 167, Dec-11 188, Mar-12 205.
Technically, the stock has been forming a constructive flat base since the end of February.
A trigger buy point would follow a move over the 29.5 area on strongly increasing trading volume with an initial stop loss in the 27 area. The stock trades somewhat thinly so position size needs to be relatively small. Earnings are expected after the market close on Tuesday May 3 which adds to near-term risk in the price movement. The overall stock market environment appears positive and supportive of new stock positions.
United Rentals (URI), the largest equipment rental company in the world, has an integrated network of more than 550 rental locations in 48 states and Canada offering such items as forklifts, bulldozers, excavators, welders, and many others. Customers include construction and industrial companies, utilities, municipalities, and homeowners.
In their latest quarter (announced the day before yesterday), the company reported earnings of 0.36/share, $0.30 better than estimates; revenues rose 25% year/year to $656 million versus the $610 million consensus. During the earnings conference call, management was very bullish about the outlook for 2012, expecting significant synergies from their acquisition of RSC holdings — expected to close at the end of April. On valuation, the stock has a forward P/E of 11 on forecast earnings per share growth of 37%, resulting in a PEG of 0.3, a reasonable valuation.
Technically, the stock is breaking out of a flat base after a strong run in the second half of 2011.
While the overall stock market remains in a corrective phase, this stock offers a decent risk/reward with an entry in the 45 area and a stop-loss around 43 (the upper end of the eps-related up-gap in price on April 18, 2012). A way to play it would be to enter half a position now and then wait to see how it holds up versus the rest of the market.
I saw this first on Peter Brandt’s blog about three weeks ago. Jesse Livermore might say Apple (AAPL) has a speculative chart with a possible topping formation, as illustrated in C. M. Flumiani’s 1965 book, The Stock Market Secrets of Jesse Livermore. I previously wrote about how Apple was surging over its multi-year trend channel and the action resembled a blow-off top (Apple Inc Is Getting Overbought).
Fundamentally perhaps competition is finally starting to exact its toll as Apple begins to struggle with the law of large numbers. The common question arises: how fast can a company grow with $128 billion in revenue? Reggie Middleton of BoomBustBlog spells out his negative thesis that Apple is losing market share in iPads to Android devices.
The technical setup shown above creates a decent trade setup. The idea would be to wait for a weak short-lived bounce (from the recent dip) in Apple shares on the daily chart and enter a short position on the first down day with a tight stop at the high of the day. If the original timing is wrong and the trade stops out, it could be worth trying once or twice more (i.e. entering on a down day). The downside target would be the top of the gap formed on January 25 around the 444 level, close to the 200 day moving average.
The weak payroll numbers out this Friday (according to the government, nonfarm payrolls added 120,000 new jobs in March, down from 240,000 jobs added in February and below consensus expectations of 200,000) echo a disturbing trend I’ve been seeing lately in another key economic indicator. The U.S. Energy Information Administration (EIA) U.S. Total Gasoline Retail Sales By Refiners has fallen off a cliff from 40.3 million gallons per day (MGD) in January 2011 to 28.4 MGD in January 2012 (the last available data) — the lowest monthly number ever in the data series, which began in January 1983. On the surface, the weakness in this number seems to imply significant economic weakness in the United States. However, it is unclear how much of the decline is related to cutbacks at the ConocoPhillips, Sunoco and HOVENSA refineries ahead of threatened permanent closures of these refineries (due to claims of unprofitability and economic unsustainability). The fast rising crack spread –the difference in price between gasoline and crude oil — seems to imply a gasoline supply issue (too little supply) rather than a lack of demand.
Should the crack spread continue to expand, Western Refining (WNR) should benefit. They refine and market crude oil and refined products in West Texas, Arizona, New Mexico, Utah, Colorado, and the mid-Atlantic region. However, I view the closing of major refining capacity in the U.S. as unlikely since the government views a loss of this capacity as a national security threat. But until the government intervenes, the crack spread may continue to rise. The bottom line: the weakness in U.S. Total Gasoline Retail Sales By Refiners may reflect an industry supply issue rather than a weakening economy. This makes Western Refining an interesting speculation.
Michael Kors Holdings (KORS), a marketer of designer apparel, accessories and footwear under the Michael Kors name, went public in December at $20 and ran sharply higher to the $50 area by mid-March where it is now forming a constructive consolidation. A break over $50 on heavy volume would trigger a buy signal.
In its latest fiscal quarter, the company reported earnings per share (eps) grew by 87% year/year and sales increased by 68% year/year. Analysts see 79% growth in eps for fiscal year 2012, giving the company a forward P/E of 69 and a PEG ratio of 0.87 — a reasonable number. I would follow any purchase with an initial stop loss in the 7% area.
Zillow Inc (Z), a provider of online real estate data that connects homebuyers with sellers and mortgage professionals via www.Zillow.com, rose over resistance today in a bottoming base on volume 137% over 50 day average volume. The following chart shows the daily trading action in the stock over the past eight months.
An initial public offering (ipo) in July, in its recent quarter, it reported an earnings increase of 108% year/year and sales up 250% year/year. With a forward P/E of 60 on 2013 estimates, and eps growth forecast up 130% in fiscal year 2013, the PEG ratio sits at 0.46 — not too bad for hyper-growth. Ipo’s have been showing strong relative strength lately. I like the security at the current price (around 37) with a 7% initial stop loss.