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.
February 26, 2011
February 12, 2011
Stock #7 HNH - Handy & Harman Ltd. - 1-year gain = 545% (2/11/2011)
Stock #7 – HNH – Handy & Harman Ltd. (fka WHX Corp) – 1 year gain = 545% (as of 2/11/2011)
Metal Processing and Fabrication
The company changed its name and symbol recently and some sites don’t recognize the old symbol or don’t have any old news linked to the new symbol. So if anyone knows more news detail than I could find, please feel free to comment.
1. HNH (formerly WXCO) is a supplier of metals and tubing to the auto and home-building industry, among others. Needless to say, those were two of the hardest hit groups in the “great recession” and the stock price reflected it. The stock declined from about $120 in 2005 to a low of $1.10 by the second half of 2009. Technical neglect has been consistent pattern on each of these stocks making 500% moves.
2. The stock had no analyst coverage or earnings estimates available (neglect).
3. The Group RS rating was 93. Other stocks in the group that did well included NNBR, LDSH, and TKR.
4. The company had 300% or so eps growth for 2 straight quarters (6/2010, 9/2010) after stock had already bottomed earlier in the year. Sales growth during the move was between 14% and 32%.
5. IBD ratings are 97 Comp, 80 EPS, and 99 RS.
6. Fund ownership was up 24% from March to June (note the initial breakout was in April 2010). The stock only had 21 funds owning it. Fund ownership slipped back near March 2010 levels by December. 53% of the company is owned by management.
7. The float was 5.7 million. The company had a 1:10 reverse split in late 2008.
8. Fundamentals were not great – company was losing money most quarters and had no return on equity. But the last two quarters they were profitable and had good sales growth. PE was about 34, the high end of its 5 year range.
Weekly chart:
The Breakouts:
1. At the end of its descent from $120, the stock formed a double bottom in 2009 and then built an 8-month base along the pivot point before breaking out in April 2010. After a high-volume successful test of its 50-day average, the stock bounced and broke out of the 8-month base in early April (1st-2nd). The stock was up 9% on the day of the breakout and rallied for 11 days for a total move of 48% from the $2.61 breakout point. The Company updated its Q1 earnings guidance about a week after the breakout on April 12th, and the stock continued its rally after earnings.
2. After the April 2010 move, the stock formed a 17-week base and broke out in mid-August 2010. The volume dropped off drastically during the second half of the base before the breakout. The Company announced its June 2010 eps results which showed 296% and 14% growth in eps and sales, respectively. The stock was up 19% on the breakout day, and it continued its rally for another 7 days. The move carried the stock 94% past the $5 breakout price. After this strong move the stock consolidated for about 6-7 weeks.
3. After a 6-7 week base, the stock broke out on October 1st on high volume and $$ volume. The company released its earnings results, showing 325% eps and 22% sales growth. The stock was up 18% on the breakout day and ended up making a move of 21% from the $9.68 breakout price in 8-9 days. The stock then attempted another breakout in November 2010 that failed, and the stock got into a trading range that it is still in today.
So why did HNH go up 500% in a year?
Neglect + Turnaround earnings growth (300%+) + news catalyst + sector RS. This stock had turnaround earnings growth in triple digits that caused a large percentage gain from a low price area. Since there were two earnings related breakouts, it does appear that news catalyst was important to get the stock to get back into its uptrend. Most of these stocks that are up 500% started from $1 or less in 2009 and formed long bottoms and bases in preparing for its recovery move. HNH was no different.
Metal Processing and Fabrication
The company changed its name and symbol recently and some sites don’t recognize the old symbol or don’t have any old news linked to the new symbol. So if anyone knows more news detail than I could find, please feel free to comment.
1. HNH (formerly WXCO) is a supplier of metals and tubing to the auto and home-building industry, among others. Needless to say, those were two of the hardest hit groups in the “great recession” and the stock price reflected it. The stock declined from about $120 in 2005 to a low of $1.10 by the second half of 2009. Technical neglect has been consistent pattern on each of these stocks making 500% moves.
2. The stock had no analyst coverage or earnings estimates available (neglect).
3. The Group RS rating was 93. Other stocks in the group that did well included NNBR, LDSH, and TKR.
4. The company had 300% or so eps growth for 2 straight quarters (6/2010, 9/2010) after stock had already bottomed earlier in the year. Sales growth during the move was between 14% and 32%.
5. IBD ratings are 97 Comp, 80 EPS, and 99 RS.
6. Fund ownership was up 24% from March to June (note the initial breakout was in April 2010). The stock only had 21 funds owning it. Fund ownership slipped back near March 2010 levels by December. 53% of the company is owned by management.
7. The float was 5.7 million. The company had a 1:10 reverse split in late 2008.
8. Fundamentals were not great – company was losing money most quarters and had no return on equity. But the last two quarters they were profitable and had good sales growth. PE was about 34, the high end of its 5 year range.
Weekly chart:
The Breakouts:
1. At the end of its descent from $120, the stock formed a double bottom in 2009 and then built an 8-month base along the pivot point before breaking out in April 2010. After a high-volume successful test of its 50-day average, the stock bounced and broke out of the 8-month base in early April (1st-2nd). The stock was up 9% on the day of the breakout and rallied for 11 days for a total move of 48% from the $2.61 breakout point. The Company updated its Q1 earnings guidance about a week after the breakout on April 12th, and the stock continued its rally after earnings.
2. After the April 2010 move, the stock formed a 17-week base and broke out in mid-August 2010. The volume dropped off drastically during the second half of the base before the breakout. The Company announced its June 2010 eps results which showed 296% and 14% growth in eps and sales, respectively. The stock was up 19% on the breakout day, and it continued its rally for another 7 days. The move carried the stock 94% past the $5 breakout price. After this strong move the stock consolidated for about 6-7 weeks.
3. After a 6-7 week base, the stock broke out on October 1st on high volume and $$ volume. The company released its earnings results, showing 325% eps and 22% sales growth. The stock was up 18% on the breakout day and ended up making a move of 21% from the $9.68 breakout price in 8-9 days. The stock then attempted another breakout in November 2010 that failed, and the stock got into a trading range that it is still in today.
So why did HNH go up 500% in a year?
Neglect + Turnaround earnings growth (300%+) + news catalyst + sector RS. This stock had turnaround earnings growth in triple digits that caused a large percentage gain from a low price area. Since there were two earnings related breakouts, it does appear that news catalyst was important to get the stock to get back into its uptrend. Most of these stocks that are up 500% started from $1 or less in 2009 and formed long bottoms and bases in preparing for its recovery move. HNH was no different.
February 8, 2011
The Inches We Need Are All Around Us
You'll come to realize after a while that I am a sports fanatic - I am particularly a big fan of coaches. Coaches have to be able to motivate - they have to be able to draw out the best in each player. But funny thing is that many times these same ideas can be applied to individuals. I always say sports and trading are very similar in many different ways.
This is one of my all-time favorite sports movie clips - from Any Given Sunday. I pay close attention to what he says - the inches in life make the difference, and they make the difference in trading as well.
This is one of my all-time favorite sports movie clips - from Any Given Sunday. I pay close attention to what he says - the inches in life make the difference, and they make the difference in trading as well.
February 7, 2011
Stock #6 SHZ – China Shen Zhou Mining & Resources Inc. – 1-year gain = 562% (as of 2/4/2011)
Stock #6 SHZ – China Shen Zhou Mining & Resources Inc. – 1-year gain = 562% (as of 2/4/2011)
Mining – Metal Ores
Although not listed in the States very long, this stock has made quite a move in a short period of time. The stock was around $8 in early 2008 before collapsing to a penny stock by the March 2009 bear market bottom. The stock would breakout in mid-2009 on high volume to get above a dollar a share, then formed a base for about 15 months going into the fall of 2010. From that point on, it was all about 3 words: China Rare Earth.
A stock bottoming under $1 and forming a long base after the initial break out of a bottoming pattern is similar to the other stocks studied thus far. The long 15-month base on SHZ yielded 4 tradable breakouts between October and December 2010 before the stock retreated to its 50-day line in January 2011.
The breakouts:
1. 10/8/2010 – The stock broke out of a month long base within the larger 15-month base on very high volume. The stock was up 12% on the day on $325k dollar volume. The stock rallied for 4 days for a total move of 50% from the breakout point. The stock was at $1.65 at the peak, then had a quick 3-day pullback that yielded the next breakout.
2. 10/19/10 – The stock spiked up on no news I could find…stock was up 65% on the day on big jump in dollar volume to $3.5M. The stock gapped up big the next day on even bigger volume for a total two-day move of 178% from the breakout point. This was too much too fast and the stock pulled back about 50% and formed a double-bottom base along its 50-day average into early December 2010. The company announced earnings during the pullback but it did not breakout.
3. 12/3/2010 – The company raised sales guidance for 2010 and 2011, showing 245% and 162% growth respectively. The stock was up 25% that day on $16.7M dollar volume. The stock drifted upward over the next 7 days for a total move of 87% from the breakout price. It then drifted downward for about 7-8 days on low volume, forming a handle-like pattern near the high of the double bottom base.
4. 12/27/2010 – The stock started to move on China supply concerns along with the other stocks in its sector. The stock was up 10% on $10M dollar volume that day and added a 21% day the following day on $53M dollar volume. After the third day the stock had made a 125% move in 3 days from the breakout price. It slowly rolled over the next few days and again retreated for a test of its 50-day average. As of today the stock has bounced weakly off the 50-day and it is yet to be seen if it can hold it.
Here’s some tidbits on the stock:
1. The stock had neglect going into the rally with no estimates and no analyst coverage.
2. The company had good earnings and sales growth in the September 2010 quarter announced in November, and then raised earnings guidance in early December. The company was not consistently profitable in prior years, but that appeared to be changing as sales were rising at a triple digit clip in June and September 2010.
3. Sector RS was 99, so SHZ’s sector was likely a factor – any company both in China and in rare earth group did well ending 2010. Other strong stocks in the group (with low eps ratings) were REE, MCP, NAK, MSB.
4. The stock’s float was 5 million. Average daily volume is 4.1M.
5. The stock has a P/E of 19 and no debt. ROE is 25% and p/b is 10.
6. IBD Ratings: EPS 66, RS 99, Composite 98.
7. Fund trend is flat – one single fund owning stock since at least March 2010.
8. The stock’s trend intensity was at 111, 151, 135, and 163 at the breakouts, respectively.
So why did SHZ go up 500% plus in a year?
SHZ had several factors – neglect, low price/float, sector catalyst, good earnings guidance. Other than the institutional and technical neglect preceding the move, the strongest factor appears to be a combination of positive earnings guidance and the strong sector, especially in late 2010. Its fundamentals were okay except the company was still losing money for the most part until September 2010 quarter. Sales were growing at a triple-digit rate and the company was just above break-even, so it appears that the sales numbers were driving some speculation in the stock in hopes of longer term profitability around the corner. This stock, as the others studied, really took off in price and volume once it got to the $4 range and broke out. The move from there was about 145% within 7-8 days. The breakouts were very good setups for the most part, moving in bursts of 2-3 days and pulling back in an orderly fashion to set up the next breakout.
Mining – Metal Ores
Although not listed in the States very long, this stock has made quite a move in a short period of time. The stock was around $8 in early 2008 before collapsing to a penny stock by the March 2009 bear market bottom. The stock would breakout in mid-2009 on high volume to get above a dollar a share, then formed a base for about 15 months going into the fall of 2010. From that point on, it was all about 3 words: China Rare Earth.
A stock bottoming under $1 and forming a long base after the initial break out of a bottoming pattern is similar to the other stocks studied thus far. The long 15-month base on SHZ yielded 4 tradable breakouts between October and December 2010 before the stock retreated to its 50-day line in January 2011.
The breakouts:
1. 10/8/2010 – The stock broke out of a month long base within the larger 15-month base on very high volume. The stock was up 12% on the day on $325k dollar volume. The stock rallied for 4 days for a total move of 50% from the breakout point. The stock was at $1.65 at the peak, then had a quick 3-day pullback that yielded the next breakout.
2. 10/19/10 – The stock spiked up on no news I could find…stock was up 65% on the day on big jump in dollar volume to $3.5M. The stock gapped up big the next day on even bigger volume for a total two-day move of 178% from the breakout point. This was too much too fast and the stock pulled back about 50% and formed a double-bottom base along its 50-day average into early December 2010. The company announced earnings during the pullback but it did not breakout.
3. 12/3/2010 – The company raised sales guidance for 2010 and 2011, showing 245% and 162% growth respectively. The stock was up 25% that day on $16.7M dollar volume. The stock drifted upward over the next 7 days for a total move of 87% from the breakout price. It then drifted downward for about 7-8 days on low volume, forming a handle-like pattern near the high of the double bottom base.
4. 12/27/2010 – The stock started to move on China supply concerns along with the other stocks in its sector. The stock was up 10% on $10M dollar volume that day and added a 21% day the following day on $53M dollar volume. After the third day the stock had made a 125% move in 3 days from the breakout price. It slowly rolled over the next few days and again retreated for a test of its 50-day average. As of today the stock has bounced weakly off the 50-day and it is yet to be seen if it can hold it.
Here’s some tidbits on the stock:
1. The stock had neglect going into the rally with no estimates and no analyst coverage.
2. The company had good earnings and sales growth in the September 2010 quarter announced in November, and then raised earnings guidance in early December. The company was not consistently profitable in prior years, but that appeared to be changing as sales were rising at a triple digit clip in June and September 2010.
3. Sector RS was 99, so SHZ’s sector was likely a factor – any company both in China and in rare earth group did well ending 2010. Other strong stocks in the group (with low eps ratings) were REE, MCP, NAK, MSB.
4. The stock’s float was 5 million. Average daily volume is 4.1M.
5. The stock has a P/E of 19 and no debt. ROE is 25% and p/b is 10.
6. IBD Ratings: EPS 66, RS 99, Composite 98.
7. Fund trend is flat – one single fund owning stock since at least March 2010.
8. The stock’s trend intensity was at 111, 151, 135, and 163 at the breakouts, respectively.
So why did SHZ go up 500% plus in a year?
SHZ had several factors – neglect, low price/float, sector catalyst, good earnings guidance. Other than the institutional and technical neglect preceding the move, the strongest factor appears to be a combination of positive earnings guidance and the strong sector, especially in late 2010. Its fundamentals were okay except the company was still losing money for the most part until September 2010 quarter. Sales were growing at a triple-digit rate and the company was just above break-even, so it appears that the sales numbers were driving some speculation in the stock in hopes of longer term profitability around the corner. This stock, as the others studied, really took off in price and volume once it got to the $4 range and broke out. The move from there was about 145% within 7-8 days. The breakouts were very good setups for the most part, moving in bursts of 2-3 days and pulling back in an orderly fashion to set up the next breakout.
Strategically Held Information Technology
I will be posting more this week, already have a stock ready just need to paste images and put it on the blog.
I have just upgraded my laptop to Windows 7 so I was without it all weekend...will post SHZ tonight and continue on with the study.
One other note on the study. Due to scheduling and simple practicality, I am going to focus the study on stocks up 500% in a year going forward. My plan is to update the list daily and research stocks as they get added. There are plenty of stocks that are in this category and should be enough sample size over a period of time.
Finally I am through the family sickness and IT issues so will be able to give more time to this. SHZ will be posted this evening.
Happy Trading :)
I have just upgraded my laptop to Windows 7 so I was without it all weekend...will post SHZ tonight and continue on with the study.
One other note on the study. Due to scheduling and simple practicality, I am going to focus the study on stocks up 500% in a year going forward. My plan is to update the list daily and research stocks as they get added. There are plenty of stocks that are in this category and should be enough sample size over a period of time.
Finally I am through the family sickness and IT issues so will be able to give more time to this. SHZ will be posted this evening.
Happy Trading :)
January 29, 2011
Stocks up 500% in a year
So the stocks studied so far make up the stocks that were up 500% + in a year as of 1/10/2011. I figure this is a good time to point out some of the common traits from a fundamental stand point and the basic characteristics of the stocks. Later this week I will look at the various chart characteristics but for now here's the non-technical points:
1. Each stock was an IPO in the 90's.
2. Each stock was below 100M float.
3. The average volume ranged from 21k to 3.7M. Two of the stocks averaged below 100k daily.
4. Three of the five stocks had a Sector RS of 84 or higher. Sector seemed to have some effect.
5. IBD Composite ratings were all 65+, mostly due to high RS ratings. EPS ratings were no higher than 80 and as low as 12.
6. Fund buying trend for four of the five stocks was up during the run. This appears to be important to the stock's momentum upward and occurs during the biggest moves.
7. The fundamental ratios didn't matter at all - they were all over the place.
8. Earnings and sales growth - two of the five stocks had explosive earnings and sales growth with acceleration, RDCM and LGL. CPWM was a retailer - driven by same store sales, and had good sales for three straight quarters and had 232 eps growth in the holiday quarter. Issue here is that RDCM and LGL were the two stocks with below 100k average volume. But overall earnings/sales growth appeared to matter to a degree.
9. That being said, two of the stocks had future prospect catalysts - one an energy resource company with no revenue and a biotech with its main hope on a drug trial. For those the current earnings/sales did not matter.
On that point, my next post will address the technicals and news catalysts, including looks at the breakouts and bases. Hopefully by Monday/Tuesday I will have that posted.
Let me know if you have any additional observations as always.
1. Each stock was an IPO in the 90's.
2. Each stock was below 100M float.
3. The average volume ranged from 21k to 3.7M. Two of the stocks averaged below 100k daily.
4. Three of the five stocks had a Sector RS of 84 or higher. Sector seemed to have some effect.
5. IBD Composite ratings were all 65+, mostly due to high RS ratings. EPS ratings were no higher than 80 and as low as 12.
6. Fund buying trend for four of the five stocks was up during the run. This appears to be important to the stock's momentum upward and occurs during the biggest moves.
7. The fundamental ratios didn't matter at all - they were all over the place.
8. Earnings and sales growth - two of the five stocks had explosive earnings and sales growth with acceleration, RDCM and LGL. CPWM was a retailer - driven by same store sales, and had good sales for three straight quarters and had 232 eps growth in the holiday quarter. Issue here is that RDCM and LGL were the two stocks with below 100k average volume. But overall earnings/sales growth appeared to matter to a degree.
9. That being said, two of the stocks had future prospect catalysts - one an energy resource company with no revenue and a biotech with its main hope on a drug trial. For those the current earnings/sales did not matter.
On that point, my next post will address the technicals and news catalysts, including looks at the breakouts and bases. Hopefully by Monday/Tuesday I will have that posted.
Let me know if you have any additional observations as always.
Stock #5 LGL – L G L Group Inc. - 1-year gain 500% (1/10/11)
Stock #5 LGL – L G L Group Inc.
Machinery – Gen Industrial
LGL is a company in the network infrastructure component business – it has large company customers such as Cisco, Erricson, Raytheon, Honeywell, and others.
The company was around in the 90’s for the internet bubble. The stock declined from a top in 1998 to a low of exactly $1 a share in late 2008. It spent the next few months forming a base and broke out of its bottom, going from $2 to $4 in about three weeks to start of its recovery. Much like the other stocks, this one was in decline for many years and broke out with the bear market bottom in early 2009. Also like the other stocks, after it bottomed it formed a long base to act as a springboard for a big move.
In mid 2009 LGL began forming what would be a 11-month cup with handle base, with the handle forming in February and March 2010. The breakout of this pattern on high volume on an earnings report was all it took to stir the tanks for this rocket. It yielded 7 breakouts including the c&h breakout. Not all were perfect but there were chances to trade this one. I have noted the bases, breakouts, and any breakout catalysts on the chart.
First the charts, then the other stuff.
Stock is very low float: 1 million shares. Average daily volume 21k.
Sector RS = 84. Other stocks in group did well: SHS RBN AIMC DXPE.
IBD Ratings: Comp 91; RS 99; EPS 80
Fund trend: UP – Funds 14, 15, 18, 18 in March-Dec 2010. You can see the fund buying in September on the chart in the increase in volume and dollar volume.
Stock’s PE and PB were 10 and 6, and D/E was 7%.
EPS Growth was triple digits as the company went from loser to growth stock. Growth was 400/-8, 202/42, 326/73, and 305/69 in the Dec ’09 – Sept ’10 eps reports. Earnings mattered. Earnings for 2010 and 2011 was projected to grow 384% and 24%.
So why did this stock go up 500% in a year? Easy to see - this stock had neglect + explosive earnings growth + low float...and that turned into momentum under fund buying pressure. Who says earnings don't matter huh?
Machinery – Gen Industrial
LGL is a company in the network infrastructure component business – it has large company customers such as Cisco, Erricson, Raytheon, Honeywell, and others.
The company was around in the 90’s for the internet bubble. The stock declined from a top in 1998 to a low of exactly $1 a share in late 2008. It spent the next few months forming a base and broke out of its bottom, going from $2 to $4 in about three weeks to start of its recovery. Much like the other stocks, this one was in decline for many years and broke out with the bear market bottom in early 2009. Also like the other stocks, after it bottomed it formed a long base to act as a springboard for a big move.
In mid 2009 LGL began forming what would be a 11-month cup with handle base, with the handle forming in February and March 2010. The breakout of this pattern on high volume on an earnings report was all it took to stir the tanks for this rocket. It yielded 7 breakouts including the c&h breakout. Not all were perfect but there were chances to trade this one. I have noted the bases, breakouts, and any breakout catalysts on the chart.
First the charts, then the other stuff.
Stock is very low float: 1 million shares. Average daily volume 21k.
Sector RS = 84. Other stocks in group did well: SHS RBN AIMC DXPE.
IBD Ratings: Comp 91; RS 99; EPS 80
Fund trend: UP – Funds 14, 15, 18, 18 in March-Dec 2010. You can see the fund buying in September on the chart in the increase in volume and dollar volume.
Stock’s PE and PB were 10 and 6, and D/E was 7%.
EPS Growth was triple digits as the company went from loser to growth stock. Growth was 400/-8, 202/42, 326/73, and 305/69 in the Dec ’09 – Sept ’10 eps reports. Earnings mattered. Earnings for 2010 and 2011 was projected to grow 384% and 24%.
So why did this stock go up 500% in a year? Easy to see - this stock had neglect + explosive earnings growth + low float...and that turned into momentum under fund buying pressure. Who says earnings don't matter huh?
January 28, 2011
Chart Porn
While I am working, here are the weekly charts from the first 4 stocks. Tell me what you see - there are no wrong answers.
January 27, 2011
Ignore that man behind the curtain...
I am working on a spreadsheet to try to organize the "data" a little better for analysis. Fitting it in while trading and dealing with sick family members has proven a challenge.
I am also reading Monster Stocks by John Boik presently...and a lot of that book so far relates directly to what I am trying to do here. Stockbee members should read the review of that book on the stockbee site...search for monster stocks.
To get your suspense up, the next stock I'll be looking at will be LGL. It was up 500% in a year as of 1/8/11.
Anyone out there with good ideas for easily posting charts with notes on them to the blog let me know please...Telechart doesn't seem to have the option to save an image of the chart and paste it in here.
I appreciate your patience while I fine tune things a bit in midstream. I am learning to do this so some adjustments aren't seen as necessary until you start.
Happy Trading...don't forget to sell ;)
I am also reading Monster Stocks by John Boik presently...and a lot of that book so far relates directly to what I am trying to do here. Stockbee members should read the review of that book on the stockbee site...search for monster stocks.
To get your suspense up, the next stock I'll be looking at will be LGL. It was up 500% in a year as of 1/8/11.
Anyone out there with good ideas for easily posting charts with notes on them to the blog let me know please...Telechart doesn't seem to have the option to save an image of the chart and paste it in here.
I appreciate your patience while I fine tune things a bit in midstream. I am learning to do this so some adjustments aren't seen as necessary until you start.
Happy Trading...don't forget to sell ;)
January 23, 2011
Stock #4 - AMRN - Amarin Corp - 1-year gain = 557% (1/10/11)
Stock #4 - AMRN – Amarin Corp – Medical – Ethical Drugs
- The stock had 3 EP days in November 2010 that ultimately took the stock from $3 to $9.66. Both days were breakouts:
o 11/10/2010 – The stock had formed a tightening, low volume downward drifting range near recent highs for about 2 weeks and rested on its 50-day moving average going into this breakout on an EP day. The news catalyst was that the company was announcing its Phase 3 results for AMR101 in 2010, instead of 2011. The stock rose 9% on high volume. The stock rallied from $3 to $3.80 in 5 days before forming a tight downward drifting range for about 7 days, coming to rest at $3.50 area.
o 11/29/2010 – The Company announced positive Phase 3 results for AMR101 and the stock gaps up on a big white candle. The breakout was on around $240M dollar volume. Stock opened up 49% and finished the day up 65%. As can happen after gap moves like this the stock went sideways in the breakout day range for about 10 days.
o 12/15/2010 – On no news, the stock rose 6% (after being up over 12% intraday). This breakout was on much lower volume than the previous breakout, but the stock still managed to rally 32% in about 4 days before drifting upward to 52-week highs in light action. The stock stalled after a total rally of 63% from this breakout.
o 1/6/2011 – The stock tried to break out again, and it rallied 10% to new highs at 9.66 on decent volume. But the breakout retraced itself the following week.
Why did AMRN go up 200% plus in a year?
1. This stock has neglect from a chart perspective before making the bulk of its move. The stock bottomed under $1 in early 2009, just like every other stock so far. After rallying off the lows it formed a one-year base and broke out to start its uptrend in early 2010.
2. Another part of neglect – fund ownership – wasn’t as bad for this stock as the other stocks so far. Funds owning the stock were 12 (3/2010), 18 (6/2010), 23 (9/2010), and 42 (12/2010). So there was some fund ownership there. But notice the jump in funds between March and September; it doubled. This coincided with a 300% rally in the stock from $1 to $3 in 6 months.
3. Earnings growth and fundamentals don’t appear to have mattered in this case; the company has many years of losses and projects a loss in 2011. IBD earnings rating is 48 in January 2011.
4. This stock had float of 60 million. So far each stock studied was under 100 million.
5. Each stock analyzed so far has been low priced at the beginning of its move and made it through the $4-$6 range during the big leg of the move. AMRN did the same, going from $3 to $9.66 in 2 months. Just before that move, the stock broke out of its year-long base, based again for 6 months, then tripled. This pattern of bottoming in neglect, breaking out, basing for a long time (months), and then breaking out for a large move seems to be consistent so far.
6. The stock’s IBD sector rating is 49. But this sector is different from others; usually company specific news related to testing of drugs, drug patents, regulatory approvals, etc. But other stocks in the ethical drugs group had good relative strength: JAZZ, QCOR, VRX to name a few.
7. There was definitely a news catalyst for AMRN. The AMR101 cardiovascular drug testing news releases directly coincide with the rally. This drug is their lead candidate for the future and has had a high positive news flow.
Personally I try not to trade these stocks dependent on drug trials, biotech and such. Unless you are a cardiovascular expert I’m not sure how one could predict drug trial results. Many of those announcements result in big gaps, like this stock had in November. This stock’s big move appears mostly based on news catalyst. But neglect was the main common factor among this stock and the other big gainers so far.
Other notes:
- The company’s focus is on cardiovascular disease. Its leading candidate is a drug called AMR101, which is designed to reduce triglycerides. Phase 3 positive results were announced in November 2010 with the stock near $3.50 a share. The stock expects more news on trials in Q2 2011.
- The stock’s IBD rating was 75 just after the Dec 2010 move. This was mainly due to a spike in its RS rating.
- The stock declined for about 2 years from early 2007 to early 2009 before the very bottom of its move. It then rallied hard off the bottom in early 2009, but needed another year of downward drifting range action before breaking out in the first half of 2010 through the $2 area.
- Short interest spiked in November and some reports stated that the short squeeze was on in December. Shorts are now 8% of float (12/31/2010). Down slightly from just after the breakout in Nov 2010.
- The stock IPO in 1993.
- The stock had 3 EP days in November 2010 that ultimately took the stock from $3 to $9.66. Both days were breakouts:
o 11/10/2010 – The stock had formed a tightening, low volume downward drifting range near recent highs for about 2 weeks and rested on its 50-day moving average going into this breakout on an EP day. The news catalyst was that the company was announcing its Phase 3 results for AMR101 in 2010, instead of 2011. The stock rose 9% on high volume. The stock rallied from $3 to $3.80 in 5 days before forming a tight downward drifting range for about 7 days, coming to rest at $3.50 area.
o 11/29/2010 – The Company announced positive Phase 3 results for AMR101 and the stock gaps up on a big white candle. The breakout was on around $240M dollar volume. Stock opened up 49% and finished the day up 65%. As can happen after gap moves like this the stock went sideways in the breakout day range for about 10 days.
o 12/15/2010 – On no news, the stock rose 6% (after being up over 12% intraday). This breakout was on much lower volume than the previous breakout, but the stock still managed to rally 32% in about 4 days before drifting upward to 52-week highs in light action. The stock stalled after a total rally of 63% from this breakout.
o 1/6/2011 – The stock tried to break out again, and it rallied 10% to new highs at 9.66 on decent volume. But the breakout retraced itself the following week.
- The breakouts were fairly clean on this stock, but the large gap day would have been tough to enter on a 49% opening gap. But break through highs after pullback provided decent breakouts in mid December and January that stalled the move for now.
- The bases were in tight downward drifting price action, very orderly during the bulk of the large move.
- The stock’s trend intensity throughout the move was:
o April 2010 (before/after breakout): 127/129
o November 2010 (before/after breakouts): 106/127
o December 2010 (before/after breakout): 165/163
o January 2010 (before/after breakout): 172/171
- Note that the 300% part of the move started when the stock was at 106 TI. Subsequent breakouts were pretty high trend intensity both before and after the breakout.
As usual, any comments welcome.
January 16, 2011
Stock #3 RDCM - Radcom - 1-year gain = 570% (1/10/11)
Stock #3 RDCM – Radcom Ltd.
Internet – Network Solutions
I’m changing up the format a little here…putting the summary at the beginning and letting the detail oriented folks scroll down for the details. Anyway, next stock on our list is RDCM, which snow-balled to a 570% gain in a year as of 1/10/11.
Why did RDCM go up 200% plus in a year?
1. For this stock, it appears earnings growth and sales growth mattered. The company went from losing money to making money and coupled that with strong triple digit earnings growth and 50%+ sales growth each quarter.
2. Yet another stock with severe neglect prior to the large move, both technically, fundamentally, and institutionally. Even now after the move, the stock is still very low volume and low liquidity and has no analyst coverage or fund ownership. Each stock studied so far has this neglect quality before the move starts.
3. The main initial catalyst that started the move appears to be the signing of a contract with a China customer in March 2010 when the stock was at $2…after that the volume started to pick up (though still low liquidity) and the stock went up 500%+ from there. Since this company’s annual sales were at the $10M area at the time, new contracts can make a large % difference in sales, even if it is just a news release with the word “China” in it. The company also signed contracts in France and other countries during the year. However it was not clear what the dollar effect on sales or earnings was, which had me suspicious that this was a press release company that just releases news every time they sign a contract even if it isn’t material.
4. This stock is was not only low-priced, but very low float and low liquidity. So moves tend to be volatile. When a company like that gets explosive earnings and sales growth coupled with neglect it can make big moves. The latter part of the move, where the stock doubled in 5 weeks, appears to be pure momentum at its finest, with 2 breakouts after 4-10 day weakness in middle of that move. Even now, the stock remains low liquidity and very low average volume. This momentum move was tradable with a wide stop once the price crossed $6, but the low liquidity may have been an issue.
5. Sector appears to have had some effect on the trend. But a lot of the moves on the stock coincide with new contracts and sales growth, not sector news. Although overall technology strength may have contributed to part of the move, the large moves appear to be more stock specific.
Honestly the general up move on the stock appears to be driven mostly by the prior neglect combined with super-low liquidity/float and explosive earnings/sales growth. However, the micro-liquidity and low float appears to have accounted for the extent of the move and the character of the rallies and pullbacks, but the direction of the move was driven by other catalysts. The stock did not appear to be tradable in large positions until maybe the August - September 2010 rally.
As usual, feel free to alert me of any errors or oversights.
Now for the details and notes:
RDCM started its decline in 2006 at a split-adjusted $20, and fell to under $1 by late 2008. Similar to other stocks studied so far, this stock bottomed under $1 in late 2008 and early 2009. The stock then broke out of a 2.5 month base to begin the uptrend in the September 2009 at around $1. After going sideways for about 5 weeks, the stock broke out again in October 2009 just ahead of earnings, and more than doubled from $1.17 to $2.80 in 3 days. The stock then went sideways for about 4 months heading into February 2010 at a price of about $2.
The stock announced on 2/2/2010 that it had achieved profitability and positive cash flow for the December 2009 quarter, but the stock had already rallied into earnings and after a rally on earnings day the stock went sideways for about 6 weeks in the $2 range on very low volume. So in March 2010 the stock was sitting at $2, and still had very low average volume, fewer than 100k shares daily.
On 3/24/2010, the stock broke out of the base being built since October 2009 on a huge spike in volume (1M shares vs. < 100k average), moving from $2.15 to $3.46 (60%) on that single day. The catalyst was the first network monitoring contract signed with a Chinese mobile service provider. However, the rally was too much too fast and the stock consolidated for about 3 weeks on falling volume, during which it retraced half of the 60% rally. The pullback was fairly loose and not a tight range and contained a couple of gaps within the range.
On 4/16/2010 the stock broke out of the 3 week base and rallied for 2 days from $3.33 to $5.88, a gain of 76% in a two day burst. Once again the rally was too much too fast, and the stock retraced the entire rally, bounced, and formed an upward drifting base into late July 2010.
On 8/2/2010 the stock broke out of the upward drifting 3-month base on higher volume (thought not huge volume), breaking through the high of the base around $6. The stock made a two-day move of 27%, went sideways for about 8-9 days, then broke out again on above average volume at around $7. The stock had one more pullback of 4 days and then went parabolic, closing at $12.50 on 9/9/2010. That capped a move of 124% in a matter of 6 weeks. By this time the stock had moved from about $2 to $12 in a little less than 6 months, a 600% move.
As may be expected from a stock that makes that kind of move, the stock had a huge volume reversal day on 9/10/2010 and went into a range between $9 and $12 until January 2011. The stock has now raced back to the September 2010 highs for a test.
Other notes:
- The breakouts early on were not really very clean on this stock, with pullbacks that were loose and had wide % swings. Many of the breakouts had below a $1M dollar volume with the exception of the largest ones. The stock really took off once it passed $5-$6 area.
- Bases were long (few weeks to months) and rallies were in short bursts until the stock crossed the $5-$6 area. Once it got past that range it doubled pretty quickly, in about 5 weeks. At that time it was extended.
- Before the big move in 2010, the stock had declined for about 2 years to 2008 and bottomed for another year into 2009.
- Earnings growth/sales growth last 4 quarters starting Dec 2009:
o Dec 2009: 108/61 (first acceleration on eps and sales, first profitable qtr)
o March 2010: 119/120
o June 2010: 156/75
o Sept 2010: 275/54
- Sector relative strength: IBD Sector rating now is 91. Other stocks that did well in the sector, which you probably recognize, include winners like VHC, FFIV, WWWW, ARUN, and RAX. RDCM does network testing and monitoring.
- Currently P/E is at 54 but was negative at before the move. Price to book is 24 and debt was 0.16. Margins, ROE, and ROA all have been historically negative. Not great fundamentals.
- There is no fund ownership. No earnings estimates. It is neglected from an institutional and analyst coverage standpoint.
- Float is 3 million.
- The stock was IPO in 1997.
- IBD ratings are currently 97 Comp, 80 EPS, and 99 RS.
- Short Interest has been at about 5% last 2 months.
- There has been no notable insider buying or selling activity.
- The stock’s trend intensity was at the following levels throughout the move:
o Feb 2010 (in base): 108
o March 2010 (on breakout): 117
o June 2010 (in base): 102
o August 2010 (on breakout): 122
o Sept 2010 (at intermediate top): 163
Internet – Network Solutions
I’m changing up the format a little here…putting the summary at the beginning and letting the detail oriented folks scroll down for the details. Anyway, next stock on our list is RDCM, which snow-balled to a 570% gain in a year as of 1/10/11.
Why did RDCM go up 200% plus in a year?
1. For this stock, it appears earnings growth and sales growth mattered. The company went from losing money to making money and coupled that with strong triple digit earnings growth and 50%+ sales growth each quarter.
2. Yet another stock with severe neglect prior to the large move, both technically, fundamentally, and institutionally. Even now after the move, the stock is still very low volume and low liquidity and has no analyst coverage or fund ownership. Each stock studied so far has this neglect quality before the move starts.
3. The main initial catalyst that started the move appears to be the signing of a contract with a China customer in March 2010 when the stock was at $2…after that the volume started to pick up (though still low liquidity) and the stock went up 500%+ from there. Since this company’s annual sales were at the $10M area at the time, new contracts can make a large % difference in sales, even if it is just a news release with the word “China” in it. The company also signed contracts in France and other countries during the year. However it was not clear what the dollar effect on sales or earnings was, which had me suspicious that this was a press release company that just releases news every time they sign a contract even if it isn’t material.
4. This stock is was not only low-priced, but very low float and low liquidity. So moves tend to be volatile. When a company like that gets explosive earnings and sales growth coupled with neglect it can make big moves. The latter part of the move, where the stock doubled in 5 weeks, appears to be pure momentum at its finest, with 2 breakouts after 4-10 day weakness in middle of that move. Even now, the stock remains low liquidity and very low average volume. This momentum move was tradable with a wide stop once the price crossed $6, but the low liquidity may have been an issue.
5. Sector appears to have had some effect on the trend. But a lot of the moves on the stock coincide with new contracts and sales growth, not sector news. Although overall technology strength may have contributed to part of the move, the large moves appear to be more stock specific.
Honestly the general up move on the stock appears to be driven mostly by the prior neglect combined with super-low liquidity/float and explosive earnings/sales growth. However, the micro-liquidity and low float appears to have accounted for the extent of the move and the character of the rallies and pullbacks, but the direction of the move was driven by other catalysts. The stock did not appear to be tradable in large positions until maybe the August - September 2010 rally.
As usual, feel free to alert me of any errors or oversights.
Now for the details and notes:
RDCM started its decline in 2006 at a split-adjusted $20, and fell to under $1 by late 2008. Similar to other stocks studied so far, this stock bottomed under $1 in late 2008 and early 2009. The stock then broke out of a 2.5 month base to begin the uptrend in the September 2009 at around $1. After going sideways for about 5 weeks, the stock broke out again in October 2009 just ahead of earnings, and more than doubled from $1.17 to $2.80 in 3 days. The stock then went sideways for about 4 months heading into February 2010 at a price of about $2.
The stock announced on 2/2/2010 that it had achieved profitability and positive cash flow for the December 2009 quarter, but the stock had already rallied into earnings and after a rally on earnings day the stock went sideways for about 6 weeks in the $2 range on very low volume. So in March 2010 the stock was sitting at $2, and still had very low average volume, fewer than 100k shares daily.
On 3/24/2010, the stock broke out of the base being built since October 2009 on a huge spike in volume (1M shares vs. < 100k average), moving from $2.15 to $3.46 (60%) on that single day. The catalyst was the first network monitoring contract signed with a Chinese mobile service provider. However, the rally was too much too fast and the stock consolidated for about 3 weeks on falling volume, during which it retraced half of the 60% rally. The pullback was fairly loose and not a tight range and contained a couple of gaps within the range.
On 4/16/2010 the stock broke out of the 3 week base and rallied for 2 days from $3.33 to $5.88, a gain of 76% in a two day burst. Once again the rally was too much too fast, and the stock retraced the entire rally, bounced, and formed an upward drifting base into late July 2010.
On 8/2/2010 the stock broke out of the upward drifting 3-month base on higher volume (thought not huge volume), breaking through the high of the base around $6. The stock made a two-day move of 27%, went sideways for about 8-9 days, then broke out again on above average volume at around $7. The stock had one more pullback of 4 days and then went parabolic, closing at $12.50 on 9/9/2010. That capped a move of 124% in a matter of 6 weeks. By this time the stock had moved from about $2 to $12 in a little less than 6 months, a 600% move.
As may be expected from a stock that makes that kind of move, the stock had a huge volume reversal day on 9/10/2010 and went into a range between $9 and $12 until January 2011. The stock has now raced back to the September 2010 highs for a test.
Other notes:
- The breakouts early on were not really very clean on this stock, with pullbacks that were loose and had wide % swings. Many of the breakouts had below a $1M dollar volume with the exception of the largest ones. The stock really took off once it passed $5-$6 area.
- Bases were long (few weeks to months) and rallies were in short bursts until the stock crossed the $5-$6 area. Once it got past that range it doubled pretty quickly, in about 5 weeks. At that time it was extended.
- Before the big move in 2010, the stock had declined for about 2 years to 2008 and bottomed for another year into 2009.
- Earnings growth/sales growth last 4 quarters starting Dec 2009:
o Dec 2009: 108/61 (first acceleration on eps and sales, first profitable qtr)
o March 2010: 119/120
o June 2010: 156/75
o Sept 2010: 275/54
- Sector relative strength: IBD Sector rating now is 91. Other stocks that did well in the sector, which you probably recognize, include winners like VHC, FFIV, WWWW, ARUN, and RAX. RDCM does network testing and monitoring.
- Currently P/E is at 54 but was negative at before the move. Price to book is 24 and debt was 0.16. Margins, ROE, and ROA all have been historically negative. Not great fundamentals.
- There is no fund ownership. No earnings estimates. It is neglected from an institutional and analyst coverage standpoint.
- Float is 3 million.
- The stock was IPO in 1997.
- IBD ratings are currently 97 Comp, 80 EPS, and 99 RS.
- Short Interest has been at about 5% last 2 months.
- There has been no notable insider buying or selling activity.
- The stock’s trend intensity was at the following levels throughout the move:
o Feb 2010 (in base): 108
o March 2010 (on breakout): 117
o June 2010 (in base): 102
o August 2010 (on breakout): 122
o Sept 2010 (at intermediate top): 163
Why Why Why Why
Doing some data gathering today/tomorrow...hoping to make the process a little faster on this.
Key questions mentioned or thought of so far:
Do fundamentals matter - p/e, roi, margin, eps/sales growth etc?
Does the stock have a catalyst?
Does neglect matter?
Does float and dollar volume matter?
What kind of volume and price patterns are common?
What was the stock's momentum? How did it progress?
What was the duration of rallies and pullbacks?
Do IBD ratings matter?
Does the stock's past performance matter?
Does the stock's sector relative strength matter?
Does insider buying or selling matter?
How long since the stock IPO?
What is the fund holdings trend?
These are questions that I am trying to answer. I realize there are studies done that have already attempted to answer these questions, so some of you may be wondering why the heck I am doing this.
I am not trying to reinvent the wheel here, although it may appear that way. This is about getting good at spotting these big movers early on and developing a method to extract profit from these stocks. Reading someone else's studies alone won't make me better at it - it takes repeated study and training. That is why I am doing this.
I value everyone's feedback and thought-provoking comments. I also appreciate your patience with my lack of succinctness and bad humor...now to the next stock.
Key questions mentioned or thought of so far:
Do fundamentals matter - p/e, roi, margin, eps/sales growth etc?
Does the stock have a catalyst?
Does neglect matter?
Does float and dollar volume matter?
What kind of volume and price patterns are common?
What was the stock's momentum? How did it progress?
What was the duration of rallies and pullbacks?
Do IBD ratings matter?
Does the stock's past performance matter?
Does the stock's sector relative strength matter?
Does insider buying or selling matter?
How long since the stock IPO?
What is the fund holdings trend?
These are questions that I am trying to answer. I realize there are studies done that have already attempted to answer these questions, so some of you may be wondering why the heck I am doing this.
I am not trying to reinvent the wheel here, although it may appear that way. This is about getting good at spotting these big movers early on and developing a method to extract profit from these stocks. Reading someone else's studies alone won't make me better at it - it takes repeated study and training. That is why I am doing this.
I value everyone's feedback and thought-provoking comments. I also appreciate your patience with my lack of succinctness and bad humor...now to the next stock.
January 15, 2011
List of stocks up 200% in a year (1/10/11)
It was requested that I show the list of stocks...this list is of stocks that rose 200% in a year as of 1/10/2011. This list is alphabetical, but I am studying them in order of 1-year percentage gain, so this is not the order of the study. If you dump them in Telechart and sort by custom date sort 1/10/2010-1/10/2011 you should be able to see the order:
AAU
ABL
AKRX
AMRN
APKT
AXTI
BSQR
CPE
CPWM
CRDC
CSII
DEAR
DGSE
ENTR
FTK
GENT
GSL
HAUP
HDY
HNH
IDT
IDT.C
IGOI
LCRY
LDSH
LEI
LGL
MCZ
MGIC
MHR
MIPS
NCT
NFLX
NNBR
NSU
PKOH
PPO
QCOR
RDCM
RITT
RVBD
SHZ
SMTX
SPRD
SSN
SURG
TGA
TO
TORM
TPCG
TZOO
UPI
URRE
VHC
WNC
ZANE
ZLCS
AAU
ABL
AKRX
AMRN
APKT
AXTI
BSQR
CPE
CPWM
CRDC
CSII
DEAR
DGSE
ENTR
FTK
GENT
GSL
HAUP
HDY
HNH
IDT
IDT.C
IGOI
LCRY
LDSH
LEI
LGL
MCZ
MGIC
MHR
MIPS
NCT
NFLX
NNBR
NSU
PKOH
PPO
QCOR
RDCM
RITT
RVBD
SHZ
SMTX
SPRD
SSN
SURG
TGA
TO
TORM
TPCG
TZOO
UPI
URRE
VHC
WNC
ZANE
ZLCS
January 11, 2011
Stock #2 - HDY - Hyperdynamics Corpration - 1 year return = 603% (1/10/2011)
Stock #2 - HDY - Hyperdynamics Corporation - Energy - Oil Drilling
If a name ever fit a stock, this may be it. The stock is as “hyper” as the name implies.
This stock, similar to CPWM, bottomed in early 2009 with the market, after a two-year decline. The stock had been stuck below $4 since 2000. The stock bottomed at about 25 cents a share after a two-year decline. If you zoom out you would see that the two year decline was actually part of the stock’s 10-year range between 25 cents and $4 that was not broken until late 2010.
After rallying off the bottom to about $2 in September 2009, the stock built a huge base between around 90 cents and $2 for a year into the end of August 2010. The company’s hopes were pinned on an oil field off the coast of Africa which had not had a single barrel of oil drilled yet. The company had zero revenue for their fiscal years 6/2009 and 6/2010 and had net losses as far back as the eye could see. No analyst estimates, no coverage. Neglected stock.
In early September 2010, the company announced estimated figures of 2.3B barrels of oil being in the oilfield that they have large interest in, and said it expected to spud (drill) the well by 2011 year-end (not sure if they meant fiscal or calendar year). This news release sparked a rally from just over $1 to $2, the top of the one-year range, within 2 days. The stock then drifted up in consolidation for about 12-13 days, pressing against the top of the one year range at $2 area. Then we get the following breakouts in the latter part of 2010:
9/28/2010 – The company released their 10K management discussion, where they point out that the zero revenue for last two years was due to focus on interpretation of seismic data from the well. It isn’t clear what the catalyst was in the 10K, but the stock finally broke out of the one-year range on high volume that day, and was up 25% for the day. However, there was no immediate follow through after the single day, and the stock went sideways for next 6 days on lower volume.
10/7/2010 – The stock broke out of the 6-day range at $2.50 and rallied for 7 trading days for a 40% gain to the $3.50 area. The stock fell swiftly for 2 weeks after issues with their audit report, but found a floor and established a 4-week tight base around $3-$3.50. This takes us to mid-December with the stock still in the base.
12/16/2010 – After an investor’s call where the company announced a farm out of a portion of the well, the stock broke out through $3.50 in the morning but gave up all its gains same day at the old $4 resistance from 2007. But the stock reversed upward next day and rallied through $4 to $5.40 in 4 days, a gain of 35% from the high of the failed breakout day. The stock then formed a small range pull back along its short-term averages for about 7 days.
1/6/2011 - No news as far as I can tell. But the stock broke through the $5.40 pivot point and out of the 7-day pull back. The stock ended up 14% on the day and as of 1/13/2011 is at $7.40, a gain from the breakout point of 37%. We’ll see how far it goes before pulling back, but this is the third breakout that resulted in a 35% + rally in last 4 months and doesn’t show signs of slowing down…yet.
The December 2010 and January 2011 breakouts alone and rally to date (1/13/2011) adds up to a gain of 85% once the price got through $4. Looking at the weekly chart, you can see that we had a rally off the bottom in 2009, then a year-long base into Q4 2010. The stock broke through that year-long base on the early October 2010 breakout, formed a base in Nov/Dec, and then broke out on huge volume. So we are in the second leg of the move out of that year-long base.
Other notes about the fundamentals and technicals:
- The stock bottomed out at less than $1 per share after a 2-year decline from $4 to about 25.
- The stock made 2 very large moves: the first after breaking out of a year-long range in early October (about 100% move), and the second after a 4-week tight base (85% and counting).
- The company’s fundamentals are almost not even worth mentioning, other than the fact that they have not made squat. They have lost money every year. Their revenue hopes appear to be reliant on a well that is yet to be drilled.
- At the same time, the upcoming drilling of the well is probably the single catalyst for this stock, other than oil prices being on the rise. So the macro environment is good for them and they have a source of revenue around the corner. It is merely a question of how long they can finance operations with zero sales for last 2 fiscal years before that well is drilled.
- The stock has no analyst coverage and has no estimates or ratings…this has been true for long period of time.
- Next earnings likely mid-February.
- Stock has had zero quarters of increasing fund ownership as of 1/2011.
- IBD/EPS/RS ratings were: August 2010: 40/25/88; December: 31/46/70; January: 73/12/99. Note that the earnings rating meant nothing and stock had 88 RS rating well before the Sept-Jan breakouts. Also note that the RS rating dropped to 70 at the end of the 2-month base in Oct-Dec. Currently the stock has RS = 99.
- The energy sector has been in favor since the summer with oil prices on the rise. Other stocks in same Sub-Industry have done well also – MHR AREX FXEN KOG SSN…about 10% of the stocks in that sub-industry were up 100% or more in the last 1 year.
- However, this story appears to also be about the company finally getting some revenue while oil prices are high. A lot of these exploration stocks seem to depend on their specific natural resources and what they can get out of the ground, all else being equal.
- Short interest was about 3% last two months but the change in float late in 2010 may affect that calculation.
- The stock had negative ROI, Margins. P/E was negative and d/e was over 0.5.Main problem was getting revenue from this well off the Africa coast.
- Float is 100M, but they did a private placement in 2010 that increased that by large amount.
- The insider buying was actually a point of note here – two big purchases took place by a director and the board chairman in February and May/June for a total of about 478,000 shares. These purchases took placed during the 1-year base in 2010.
- Dollar volumes on the breakouts were $2M (9/7/10); 4.5M (9/28/10); 5M (10/7/10), 14M (12/16/10), and 15M (1/6/10). Note the spike on the December breakout when the stock hit $4. Stayed high on January breakout, the second breakout after a 2-month base.
- Trend Intensity on the breakouts were above 105 each time: 9/7 111; 9/28 160; 10/7 172; 12/16 117; 1/6 155. Note each time a base formed for long period the TI fell back to 110-120 range. For example the 2-month base in late 2010 ended with a TI of 117.
Summary: Why did HDY move up by 200% or more in a year?
1. This company has essentially been in startup mode since 2000, where it began a 10-year range between 25 cents and $4. Like many companies in startup mode, the light at the end of the operating loss tunnel shines before the end of the tunnel is actually reached. So this stock’s move appears to be mostly based on the expectation for large amounts of revenue from the well off the Africa coast, which could take the company from a decade long loser to actual cash flow. Since the stock has never experienced making money, that can be a pivotal point in the future prospects for the stock as well as the company. It appears that the expectation of that time has money flowing into the stock.
2. As with any company in the oil industry, regulatory and economic factors have to be considered as well. Increasing oil prices at the same time the company is on the cusp of drilling this well appears to be as good a timing as they could ask for. The quirk with drillers is that they are all very different in the amount of resources they have and how they operate, so company specifics in this group can cause massive underperformance when the macro environment is favorable.
Looking at this stock without knowing the industry or time in history, I would have thought I was looking at a dot com stock in 1999. The zero revenue for 2 years on a stock spiking on hopes of revenue/earnings down the road sounded a lot like those days from what I remember. So this appears to be a stock that started as speculative and as the pivotal point approaches the stock is trying to price it in. It will be interesting to see how this stock’s momentum unfolds.
Anything I missed…let me know.
If a name ever fit a stock, this may be it. The stock is as “hyper” as the name implies.
This stock, similar to CPWM, bottomed in early 2009 with the market, after a two-year decline. The stock had been stuck below $4 since 2000. The stock bottomed at about 25 cents a share after a two-year decline. If you zoom out you would see that the two year decline was actually part of the stock’s 10-year range between 25 cents and $4 that was not broken until late 2010.
After rallying off the bottom to about $2 in September 2009, the stock built a huge base between around 90 cents and $2 for a year into the end of August 2010. The company’s hopes were pinned on an oil field off the coast of Africa which had not had a single barrel of oil drilled yet. The company had zero revenue for their fiscal years 6/2009 and 6/2010 and had net losses as far back as the eye could see. No analyst estimates, no coverage. Neglected stock.
In early September 2010, the company announced estimated figures of 2.3B barrels of oil being in the oilfield that they have large interest in, and said it expected to spud (drill) the well by 2011 year-end (not sure if they meant fiscal or calendar year). This news release sparked a rally from just over $1 to $2, the top of the one-year range, within 2 days. The stock then drifted up in consolidation for about 12-13 days, pressing against the top of the one year range at $2 area. Then we get the following breakouts in the latter part of 2010:
9/28/2010 – The company released their 10K management discussion, where they point out that the zero revenue for last two years was due to focus on interpretation of seismic data from the well. It isn’t clear what the catalyst was in the 10K, but the stock finally broke out of the one-year range on high volume that day, and was up 25% for the day. However, there was no immediate follow through after the single day, and the stock went sideways for next 6 days on lower volume.
10/7/2010 – The stock broke out of the 6-day range at $2.50 and rallied for 7 trading days for a 40% gain to the $3.50 area. The stock fell swiftly for 2 weeks after issues with their audit report, but found a floor and established a 4-week tight base around $3-$3.50. This takes us to mid-December with the stock still in the base.
12/16/2010 – After an investor’s call where the company announced a farm out of a portion of the well, the stock broke out through $3.50 in the morning but gave up all its gains same day at the old $4 resistance from 2007. But the stock reversed upward next day and rallied through $4 to $5.40 in 4 days, a gain of 35% from the high of the failed breakout day. The stock then formed a small range pull back along its short-term averages for about 7 days.
1/6/2011 - No news as far as I can tell. But the stock broke through the $5.40 pivot point and out of the 7-day pull back. The stock ended up 14% on the day and as of 1/13/2011 is at $7.40, a gain from the breakout point of 37%. We’ll see how far it goes before pulling back, but this is the third breakout that resulted in a 35% + rally in last 4 months and doesn’t show signs of slowing down…yet.
The December 2010 and January 2011 breakouts alone and rally to date (1/13/2011) adds up to a gain of 85% once the price got through $4. Looking at the weekly chart, you can see that we had a rally off the bottom in 2009, then a year-long base into Q4 2010. The stock broke through that year-long base on the early October 2010 breakout, formed a base in Nov/Dec, and then broke out on huge volume. So we are in the second leg of the move out of that year-long base.
Other notes about the fundamentals and technicals:
- The stock bottomed out at less than $1 per share after a 2-year decline from $4 to about 25.
- The stock made 2 very large moves: the first after breaking out of a year-long range in early October (about 100% move), and the second after a 4-week tight base (85% and counting).
- The company’s fundamentals are almost not even worth mentioning, other than the fact that they have not made squat. They have lost money every year. Their revenue hopes appear to be reliant on a well that is yet to be drilled.
- At the same time, the upcoming drilling of the well is probably the single catalyst for this stock, other than oil prices being on the rise. So the macro environment is good for them and they have a source of revenue around the corner. It is merely a question of how long they can finance operations with zero sales for last 2 fiscal years before that well is drilled.
- The stock has no analyst coverage and has no estimates or ratings…this has been true for long period of time.
- Next earnings likely mid-February.
- Stock has had zero quarters of increasing fund ownership as of 1/2011.
- IBD/EPS/RS ratings were: August 2010: 40/25/88; December: 31/46/70; January: 73/12/99. Note that the earnings rating meant nothing and stock had 88 RS rating well before the Sept-Jan breakouts. Also note that the RS rating dropped to 70 at the end of the 2-month base in Oct-Dec. Currently the stock has RS = 99.
- The energy sector has been in favor since the summer with oil prices on the rise. Other stocks in same Sub-Industry have done well also – MHR AREX FXEN KOG SSN…about 10% of the stocks in that sub-industry were up 100% or more in the last 1 year.
- However, this story appears to also be about the company finally getting some revenue while oil prices are high. A lot of these exploration stocks seem to depend on their specific natural resources and what they can get out of the ground, all else being equal.
- Short interest was about 3% last two months but the change in float late in 2010 may affect that calculation.
- The stock had negative ROI, Margins. P/E was negative and d/e was over 0.5.Main problem was getting revenue from this well off the Africa coast.
- Float is 100M, but they did a private placement in 2010 that increased that by large amount.
- The insider buying was actually a point of note here – two big purchases took place by a director and the board chairman in February and May/June for a total of about 478,000 shares. These purchases took placed during the 1-year base in 2010.
- Dollar volumes on the breakouts were $2M (9/7/10); 4.5M (9/28/10); 5M (10/7/10), 14M (12/16/10), and 15M (1/6/10). Note the spike on the December breakout when the stock hit $4. Stayed high on January breakout, the second breakout after a 2-month base.
- Trend Intensity on the breakouts were above 105 each time: 9/7 111; 9/28 160; 10/7 172; 12/16 117; 1/6 155. Note each time a base formed for long period the TI fell back to 110-120 range. For example the 2-month base in late 2010 ended with a TI of 117.
Summary: Why did HDY move up by 200% or more in a year?
1. This company has essentially been in startup mode since 2000, where it began a 10-year range between 25 cents and $4. Like many companies in startup mode, the light at the end of the operating loss tunnel shines before the end of the tunnel is actually reached. So this stock’s move appears to be mostly based on the expectation for large amounts of revenue from the well off the Africa coast, which could take the company from a decade long loser to actual cash flow. Since the stock has never experienced making money, that can be a pivotal point in the future prospects for the stock as well as the company. It appears that the expectation of that time has money flowing into the stock.
2. As with any company in the oil industry, regulatory and economic factors have to be considered as well. Increasing oil prices at the same time the company is on the cusp of drilling this well appears to be as good a timing as they could ask for. The quirk with drillers is that they are all very different in the amount of resources they have and how they operate, so company specifics in this group can cause massive underperformance when the macro environment is favorable.
Looking at this stock without knowing the industry or time in history, I would have thought I was looking at a dot com stock in 1999. The zero revenue for 2 years on a stock spiking on hopes of revenue/earnings down the road sounded a lot like those days from what I remember. So this appears to be a stock that started as speculative and as the pivotal point approaches the stock is trying to price it in. It will be interesting to see how this stock’s momentum unfolds.
Anything I missed…let me know.
Stock #2 IDT - IDT Corp - 1-year return = 623% (1/11/2011)
Stock #2: IDT.C - IDT Corp. - Telecomm - Diversified Communication Services
This is actually the C Class of IDT common stock. Since IDT comes later in the list, I will skip the Class C stock and will cover both when I research IDT.
This is actually the C Class of IDT common stock. Since IDT comes later in the list, I will skip the Class C stock and will cover both when I research IDT.
January 9, 2011
Stock #1: CPWM - Cost Plus Inc. 1-year return = 963 % (1/8/2011)
Stock #1: CPWM – Cost Plus Inc.
Sector: Retail – Department Stores (Home Furnishings)
Every stock has a story, as they say. Here’s CPWM’s story. The charts below are the weejly chart, then the daily chart at the first breakout, then the daily chart at the 2nd, 3rd, and 4th breakouts.
The move of 963% in 2010 was preceded by a year-long bottoming phase in 2009. The stock was coming off a six-year decline since late 2003 and finally bottomed out in 2009 below $1 per share. In March 2010, after building a bottom for nearly a year during which the price was between $1 and $3 per share, the stock raised earnings guidance for the Q1 2010, projecting a smaller loss for the quarter than expected. The stock doubled in the month after this news to $6 per share.
After the stock doubled in March/April 2010, it pulled back about 40% and formed what would become the lows of the cup near the 200-day average in August 2010. The stock made a 40% move off the 200-day average as it formed the right side of the cup. Volume was very low for 6 months during the formation of the cup pattern. The stock began forming a tight flag on low volume in mid-September 2010 after rallying 50% plus off the 200-day average.
Now at end of September the stock was at about $4 per share and had been in a tight base for about 10 trading days. This base resulted in the first of 3 breakouts in the next 3 months for the stock as follows:
10/3/2010: Stock had a 4% breakout on $1.6M $volume, through the $4 area, and rallied 18% in a 3-day burst. This breakout occurred in the bottom half of the cup so would likely not have been viewed as a favorable breakout from c&h view. But great setup for STIB type trade. After the 3 day rally, the stock formed another tight base for about 6 or 7 weeks heading into November eps report.
11/19/2010: The Company announced earnings better than estimates. Also they said that same store sales rose 9% y/o/y after a 9% drop in same last year. The company also extended its credit agreement. This positive news sparked an extremely high volume breakout of the 6-7 week tight base on an EP day, with $13M $volume. The stock rallied 42% from breakout point in 2 days, and then had a 6-day orderly pull back on low volume at the $8 range.
12/2/2010: After a 6-day sideways action, the stock broke out for the third time at around $8. Dollar volume was $6.5M on the breakout. The stock moved up 50%+ over next 18 trading days with a couple of 2-3 day pullbacks mixed in. The stock reversed at $12-$13 area in late December 2010.
This December 2010 rally completed a 300% move from the initial breakout point in October 2010 and a 170% move from November breakout point. The largest move came on the December breakout, which was the first breakout after the cup & handle breakout. The second and first breakouts were smaller respectively. This December breakout was last as stock broke down in late December after 50% move.
Other notes about the fundamentals and technicals:
- The stock bottomed out at less than $1 per share after a long period of decline (6 years).
- The stock made largest part of move that was tradable after it had formed a 6 month long base following a strong rally off the bottoming pattern.
- The stock’s trend intensity was at about 125 at the October and November breakouts, then hit 151 in December breakout. TI topped out at 172 in late December before the reversal.
- The stock spent the year prior to the move building a bottoming pattern in the$1-$4 area.
- The company’s first eps and sales acceleration was in Q1 2010 (May eps report). EPS/Sales growth was 75/3, 66/5, 62/7 in the first 3 quarters of 2010. The sales figures were good for retailer.
- There has been only one analyst covering the stock for couple of years – decline into 2009 was so severe that analysts abandoned the stock.
- The company’s first profitable year in a while is forecast for FY 1/2011. Earnings announcement is expected to be in February 2011.
- Stock has had 2 quarters of increasing fund ownership as of 1/2011.
- IBD rating and RS ratings were: 14/10 in January 2010, 54/96 in Aug 2010, and 67/99 in January 2011.
- RS rating was in high 90’s well before the first breakout in October.
- The retail sector has been in favor since the summer, and the group of stocks in CPWM group have also performed relatively well (WSM, PIR, BBBY). Those stocks have not performed to the extent of CPWM though.
- Short interest was about 12% in Nov 2010 and it dropped to 7%-9% by early 2011.
- The stock had negative ROI, Margins. P/E was negative and d/e was over 1 so debt was an issue.
- Float was 16M.
- No notable insider buying in 2010. One sale in early 2010 near lows.
- Dollar volume was 1.6M, 13M, and 6.5M on the Oct/Nov/Dec breakouts respectively. Note the last breakout in December was on lower $volume than the November b/o. Smaller base came along with that last Dec b/o.
Summary: Why did CPWM move up by 200% or more in a year?
This stock’s move seems to be fueled by a few factors:
1. Long period of neglect and a chart pattern that confirms it. Analysts stopped covering the stock in droves in late 2009 as the stock neared its 2009 bottoms below a dollar per share. The company’s earnings sucked for years going into 2010. Volume during the basing in 2010 was nonexistent.
2. The company’s extension of its credit agreements and same store sales news in November stands out as the continuation catalyst with a long 6-month c&h pattern supporting it.
3. The stock is a pure recovery play. It is forecast for profitability for first time this FY 1/2011, so some anticipation of that may have contributed to the recent rally as well. But with such a long period of neglect before bottoming, and then turning profitable as earnings and sales strengthen, it’s no shock that the stock rallied.
4. Sector strength was likely a factor also – others in sector did well. This was one of low float stocks in sector and made largest move.
Sector: Retail – Department Stores (Home Furnishings)
Every stock has a story, as they say. Here’s CPWM’s story. The charts below are the weejly chart, then the daily chart at the first breakout, then the daily chart at the 2nd, 3rd, and 4th breakouts.
The move of 963% in 2010 was preceded by a year-long bottoming phase in 2009. The stock was coming off a six-year decline since late 2003 and finally bottomed out in 2009 below $1 per share. In March 2010, after building a bottom for nearly a year during which the price was between $1 and $3 per share, the stock raised earnings guidance for the Q1 2010, projecting a smaller loss for the quarter than expected. The stock doubled in the month after this news to $6 per share.
After the stock doubled in March/April 2010, it pulled back about 40% and formed what would become the lows of the cup near the 200-day average in August 2010. The stock made a 40% move off the 200-day average as it formed the right side of the cup. Volume was very low for 6 months during the formation of the cup pattern. The stock began forming a tight flag on low volume in mid-September 2010 after rallying 50% plus off the 200-day average.
Now at end of September the stock was at about $4 per share and had been in a tight base for about 10 trading days. This base resulted in the first of 3 breakouts in the next 3 months for the stock as follows:
10/3/2010: Stock had a 4% breakout on $1.6M $volume, through the $4 area, and rallied 18% in a 3-day burst. This breakout occurred in the bottom half of the cup so would likely not have been viewed as a favorable breakout from c&h view. But great setup for STIB type trade. After the 3 day rally, the stock formed another tight base for about 6 or 7 weeks heading into November eps report.
11/19/2010: The Company announced earnings better than estimates. Also they said that same store sales rose 9% y/o/y after a 9% drop in same last year. The company also extended its credit agreement. This positive news sparked an extremely high volume breakout of the 6-7 week tight base on an EP day, with $13M $volume. The stock rallied 42% from breakout point in 2 days, and then had a 6-day orderly pull back on low volume at the $8 range.
12/2/2010: After a 6-day sideways action, the stock broke out for the third time at around $8. Dollar volume was $6.5M on the breakout. The stock moved up 50%+ over next 18 trading days with a couple of 2-3 day pullbacks mixed in. The stock reversed at $12-$13 area in late December 2010.
This December 2010 rally completed a 300% move from the initial breakout point in October 2010 and a 170% move from November breakout point. The largest move came on the December breakout, which was the first breakout after the cup & handle breakout. The second and first breakouts were smaller respectively. This December breakout was last as stock broke down in late December after 50% move.
Other notes about the fundamentals and technicals:
- The stock bottomed out at less than $1 per share after a long period of decline (6 years).
- The stock made largest part of move that was tradable after it had formed a 6 month long base following a strong rally off the bottoming pattern.
- The stock’s trend intensity was at about 125 at the October and November breakouts, then hit 151 in December breakout. TI topped out at 172 in late December before the reversal.
- The stock spent the year prior to the move building a bottoming pattern in the$1-$4 area.
- The company’s first eps and sales acceleration was in Q1 2010 (May eps report). EPS/Sales growth was 75/3, 66/5, 62/7 in the first 3 quarters of 2010. The sales figures were good for retailer.
- There has been only one analyst covering the stock for couple of years – decline into 2009 was so severe that analysts abandoned the stock.
- The company’s first profitable year in a while is forecast for FY 1/2011. Earnings announcement is expected to be in February 2011.
- Stock has had 2 quarters of increasing fund ownership as of 1/2011.
- IBD rating and RS ratings were: 14/10 in January 2010, 54/96 in Aug 2010, and 67/99 in January 2011.
- RS rating was in high 90’s well before the first breakout in October.
- The retail sector has been in favor since the summer, and the group of stocks in CPWM group have also performed relatively well (WSM, PIR, BBBY). Those stocks have not performed to the extent of CPWM though.
- Short interest was about 12% in Nov 2010 and it dropped to 7%-9% by early 2011.
- The stock had negative ROI, Margins. P/E was negative and d/e was over 1 so debt was an issue.
- Float was 16M.
- No notable insider buying in 2010. One sale in early 2010 near lows.
- Dollar volume was 1.6M, 13M, and 6.5M on the Oct/Nov/Dec breakouts respectively. Note the last breakout in December was on lower $volume than the November b/o. Smaller base came along with that last Dec b/o.
Summary: Why did CPWM move up by 200% or more in a year?
This stock’s move seems to be fueled by a few factors:
1. Long period of neglect and a chart pattern that confirms it. Analysts stopped covering the stock in droves in late 2009 as the stock neared its 2009 bottoms below a dollar per share. The company’s earnings sucked for years going into 2010. Volume during the basing in 2010 was nonexistent.
2. The company’s extension of its credit agreements and same store sales news in November stands out as the continuation catalyst with a long 6-month c&h pattern supporting it.
3. The stock is a pure recovery play. It is forecast for profitability for first time this FY 1/2011, so some anticipation of that may have contributed to the recent rally as well. But with such a long period of neglect before bottoming, and then turning profitable as earnings and sales strengthen, it’s no shock that the stock rallied.
4. Sector strength was likely a factor also – others in sector did well. This was one of low float stocks in sector and made largest move.
Welcome
Welcome to the Five Trades Blog. The initial purpose of the blog is to compile research from a study of the market's best performing stocks. The research is aimed at developing a method of finding five trades a year that will have potential for gains of 50% plus, with possibility of pyramiding into the stocks.
The objective of the study is to answer the following question: "What makes a stock go up 200% + in a year?"
As of Friday, January 7, 2011, there are 58 stocks that are up 200% or more in one year. These are the stocks on which my research will be focused. As of now my plan is to update the list weekly and research additional stocks as they come up in the scan. This is my first study of this kind, so there is a bit of a learning curve for me in performing this research.
More later.
bh
The objective of the study is to answer the following question: "What makes a stock go up 200% + in a year?"
As of Friday, January 7, 2011, there are 58 stocks that are up 200% or more in one year. These are the stocks on which my research will be focused. As of now my plan is to update the list weekly and research additional stocks as they come up in the scan. This is my first study of this kind, so there is a bit of a learning curve for me in performing this research.
More later.
bh
Subscribe to:
Posts (Atom)