Stock #8 – IDT – I D T Corporation – 1 year gain = 629% (as of 12/13/2010)
Of the stocks I have studied so far, this one probably made the largest move from its original bottom in early 2009…this stock went from $1 to $30 in less than 2 years. Not bad.
1. Sector: Telecommunication Services – IDT provides prepaid/rechargeable calling cards and VOIP services. The company also has an energy business segment.
2. If you pulled a weekly chart and zoom out, you would see what is close to a “V” bottom on this stock in March 2009. This stock fell from $71 in 2004 to a low under $1 in late 2008. It formed a bottom and broke out in July 2009 after around a 6-month bottom. Technical neglect has been consistent pattern on each of these stocks making 500% moves, particularly in the beginning stages of the trend. But this stock did not have extremely long bases as some other stocks did.
3. The stock had no analyst coverage or earnings estimates available (neglect). This is another common trait noted so far on these stocks.
4. The Group RS rating was 66. Other stocks in the group that did well included GNCMA and SURW. Keep in mind IDT has energy segment also, and have you seen energy prices? Oil and oil shale is a pretty good business to be in lately.
5. Earnings Growth: The Company had triple digit earnings growth with acceleration for 4 straight quarters, coinciding with the stock’s movement from $5 to $30 between February 2010 and December 2010. EPS growth was 117%, 147%, 294%, and 512% for Jan/Apr/July/Oct respectively. The January quarter was also a swing to profitability. Sales growth showed up the last two quarters and showed up in the big jump to 512% earnings growth. Sales growth was 4% and 9% the last 2 quarters (ending with Oct 2010 quarter). Several, but not all, of these stocks have had triple digit earnings growth. It’s hard to say earnings did not matter for this stock though.
6. IBD ratings are 91 Comp, 80 EPS, and 99 RS. A/D rating was A+…which is a good segway to the fund ownership issue.
7. Fund ownership was as follows from March 2010 to December 2010: 64, 116, 132, and 137. Note the large jump from March to June of 81%. The stock doubled in that quarter, particularly the last days of the quarter showed record volume. Fund ownership is over 40%.
8. The float was 12.7 million. The company had a 1:3 reverse split in early 2009. Consistently these stocks have been low float (<100 million).
9. Fundamentals were not great going into 2010 – the Company was losing money every year until July 2010 year end. ROE is pretty good now at 11% and its P/E is 15.
I won’t be posting charts on this one – there were around 9 breakouts during its run so take a gander in your charting software and pick them out…whatever your strategy…pullbacks, exhaustion, or breakouts, this stock offered some good opportunities.
So why did IDT go up 500% in a year?
Neglect + explosive earnings growth. IDT sported some impressive eps growth numbers, although its sales weren’t that explosive. But the kinlin for that fire was laid by the big decline that occurred from 2004 to 2009. The stock fell from $71 to under $1 in that time and the stock bottomed with the market and rose to $5 before earnings growth showed up. Once the earnings growth exploded, the funds came in. Funds were nearly doubled from March to June 2010, and the stock went from about $7 to $11 during that time.
