Investiv Daily

  • 03 Jul
    Want to limit trade war risk? Check out SCS

    Want to limit trade war risk? Check out SCS

    New Trump-imposed tariffs on China, Mexica and Canada are set to take effect at the end of this week, with retaliatory tariffs from those countries on the U.S. scheduled at the same time. The hand-wringing from politicians, talking heads and business experts continues to dominate the headlines, and I expect that the longer it continues, the more the broad market is going to have a hard time finding any really strong bullish momentum. Whether or not that translates to anything approximating a bear market also remains to be seen, no matter what the naysayers claim. Most economists and business executives, on both sides of the argument, do agree that in the long-term a trade war affects all sides negatively. I’ve even heard a few recently refer to an extended trade war as “mutually assured destruction” that will ultimately force all of the countries involved to eventually work out some kind of agreement. How soon will that happen is anybody’s guess, of course, so for the time being expect uncertainty and speculation to keep dominating the headlines and the news wires.

    As an investor, you can use the fact that a lot of companies that could, or will be directly affected by tariffs are likely to see their stocks underperform. In some cases, stocks currently at or near high levels could be pushed much, much lower, and that could create some nice value-oriented opportunities to pay attention to. As a contrarian-minded investor, I like that idea quite a bit, and so I’m watching a lot of those stocks pretty closely. Another smart thing you can do is to try to identify stocks whose actual exposure is likely to be more limited. Steelcase Inc. (SCS) is a stock that has been in business since 1912, but whose small-cap status means you’ve probably never heard of them. Despite that fact, SCS is the world’s largest maker of office furniture and office furniture systems. This is a company with a very good fundamental profile and what I think looks like a great value profile. At its current price, I also think that it represents a low-risk option if you’re looking for a way to invest in a stock that could provide some good long-term growth potential even as the U.S. keeps wrangling with its global trading partners.



    Fundamental and Value Profile

    Steelcase Inc. provides an integrated portfolio of furniture settings, user-centered technologies and interior architectural products. The Company’s segments include Americas, EMEA and Other Category. The Company’s furniture portfolio includes panel-based and freestanding furniture systems and complementary products, such as storage, tables and ergonomic worktools. Its seating products include task chairs, which are ergonomic seating that can be used in collaborative or casual settings and specialty seating for specific vertical markets, such as healthcare and education. Its technology solutions support group collaboration by integrating furniture and technology. Its interior architectural products include full and partial height walls and doors. It also offers services, which include workplace strategy consulting, lease origination services, furniture and asset management and hosted spaces. Its family of brands includes Steelcase, Coalesse, Designtex, PolyVision and Turnstone. SCS has a current market cap of $1.2 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings have declined while sales increased slightly. Most of the earnings decline was attributed in their last quarterly report to increased commodity costs in the U.S. while most of the increase in sales came from the EMEA (Europe, Middle East, Africa) region, with the greatest portion of overseas growth coming from Germany and the U.K. Revenues from EMEA operations totaled about 18.2% of the company’s total revenues, while the Asia Pacific region contributes less than 15%. The company cites Brexit uncertainty as a risk to its EMEA sales growth. Tariffs on steel and aluminum imports to the U.S. could actually benefit SCS as Canada and China provide most of the international competition in their industry.
    • Free Cash Flow: SCS’ Free Cash Flow is pretty cyclical, and declined almost 50% over the last quarter, but remains generally healthy, with almost $135 million in cash and liquid assets on their balance sheet.
      Debt to Equity: SCS has a debt/equity ratio of .36, which is pretty conservative. Their operating profits are adequate to service their debt, with good liquidity from cash to provide additional stability in this area if necessary.
      Dividend: SCS pays an annual dividend of $.54 per share, which at its current price translates to a dividend yield of 3.89%.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for SCS is $6.93 per share. At the stock’s current price, that translates to a Price/Book Ratio of 2.0. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Office Services & Supplies industry is 1.8, while the historical average for SCS is 2.7. I usually prefer the historical average as a measuring stick, which provides a long-term target price of $18.71. That’s 35% higher than the stock’s current price and would put the stock in the neighborhood of its 2-year high price.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

    • Current Price Action/Trends and Pivots: The stock is hovering near to its 2-year low price and appears to be holding solid support a little above $13 per share. Since October of last year, the stock has traded within a roughly $2 range, with resistance around $15.50 and support as already mentioned around $13. The stock’s highest level is around $18 per share, just a little below the long-term target price the value analysis I referred to in the last section provides. The stock’s all-time high is around $20 and was last reached in late 2015.
    • Near-term Keys: With the stock currently pivoting higher off of support around $13, and resistance likely around $15.50, there is some room for short-term traders to speculate on a bullish move of about $2 in the short-term. That could be a good swing trade using call options or buying the stock outright. If you’re willing to work a longer-term viewpoint, the $18 range is a reasonable level to work with as well. If the stock breaks its support around $13, it should find additional support around $12 per share. Downside risk in either the short-term or the long-term appears to be pretty low, which also means trading opportunities on the bearish side for this stock provide a very low probability of success.


  • 02 Jul
    SWKS is an interesting proxy for Semiconductor sector risk

    SWKS is an interesting proxy for Semiconductor sector risk

    As trade tensions continue to linger, one of the sectors that I think is going to keep seeing pressure on a global scale is Semiconductors. A recent study indicates that while this sector remains the second-largest exporting industry in the United States, its global market share has eroded, with much of its production, and even research and development investments shifting to China, Taiwan, and much of Asia. This is no doubt a part of the reasoning behind the Trump administration’s push to impose tariffs on Chinese technology imports. It is a core reason that while demand for semiconductors is likely to remain strong, costs are also likely to increase the longer the standoff between the U.S. and China continues. The question about what semiconductor producers will do – passing the costs on to their customers, or absorbing the costs themselves – isn’t encouraging for investors, because either option poses problems.

    Today’s stock is a company with a great fundamental profile, and that operates in what is likely to be one of the biggest growth areas of the entire technology space. Skyworks Solutions Inc. (SWKS) built its business by providing connectivity solutions to mobile devices like smartphones. It remains a key supplier for Apple’s (AAPL) iPhones, but has also diversified its business into the Internet of Things (IoT) space with applications for autos, smart home devices, and industrial equipment. Why do I think this is going to be such a big deal for future growth? The short answer is 5G. Most of the companies that will be providing the backbone of 5G connectivity – wireless towers and so on – are required to complete the buildout of their respective networks by 2020 or they will lose the 5G spectrum leasing rights they have collectively invested hundreds of billions (and quite possibly trillions) of dollars into. As those networks come online, demand for IoT devices that can connect to them are sure to be in high demand, on a consumer and industrial level. That said, SWKS has big exposure in Asia, with Goldman Sachs reporting earlier this year that the company derives 85% of its sales in China, and so prolonged, unresolved trade tensions and tariffs could significantly erode their profit margins.



    Fundamental and Value Profile

    Skyworks Solutions Inc. designs, develops, manufactures and markets semiconductor products, including intellectual property. The Company’s analog semiconductors are connecting people, places, and things, spanning a number of new and unimagined applications within the automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet and wearable markets. Its geographical segments include the United States, Other Americas, China, Taiwan, South Korea, Other Asia-Pacific, Europe, Middle East and Africa. It operates throughout the world with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America. It is engaged with key original equipment manufacturers (OEM), smartphone providers and baseband reference design partners. Its product portfolio consists of various solutions, including amplifiers, attenuators, detectors, diodes, filters, front-end modules, hybrid, mixers, switches, and modulators. SWKS has a current market cap of $17.6 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings and sales both increased, with earnings growing almost 13% while sales increased about 7.25%. Growing earnings faster than sales is difficult to do, and is generally not sustainable in the long term, but it is also a positive mark of management’s ability to effectively maximize the company’s business operations.
    • Free Cash Flow: SWKS has very healthy free cash flow of more than $1.2 billion over the last twelve months. This is a number that has more than doubled since mid-2016.
    • Debt to Equity: SWKS has had zero debt on its balance sheets since the beginning of 2015, which means that all of its operating profits can be used to fund research and development, expand its offerings, and bolster its cash and liquid assets. As of the last quarter, the company had more than $1.8 billion in cash, an increase of 80% from mid-2016 when it was a little under $1 billion.
    • Dividend: SWKS pays an annual dividend of $1.28 per share, which at its current price translates to a dividend yield of 1.32%.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for SWKS is $22.34 per share. At the stock’s current price, that translates to a Price/Book Ratio of 4.30. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Semiconductor & Semiconductor equipment industry is only 4.1; this is also the historical average for SWKS. That generally implies SWKS is fairly valued at current price levels. On a Price/Cash Flow basis, however, the stock is trading more than 34% below its historical average, suggesting a long-term price target of $128 per share.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

     

    • Current Price Action/Trends and Pivots: The red, diagonal line traces the stock’s upward trend trend dating back to July of last year. It is also the basis for calculating the Fibonacci retracement lines on the right side of the chart. The stock sitting practically on top of the 38.2% retracement line and has used this level for significant support multiple times since December of last year. That could give the stock another bounce, with short-term upside around $102 per share. Under current market conditions, that would likely require some kind of macroeconomic catalyst such as easing trade tensions rather than a quantitative, fundamental basis. If the stock breaks below $94, the next likely support is around $87 per share, which is also where the 50% retracement line sits. Assuming the U.S. – China trade relationship continues to deteriorate, the next likely support level around $80, or even lower is certainly not out of reach.
    • Near-term Keys: If the stock breaks below $94 as just mentioned, I believe the stock should easily drop to as low as $87 before finding any kind of significant support. An additional break below $87 would confirm a legitimate downward trend that could keep the stock dropping to somewhere between $65 and $71 per share. These could be interesting opportunities for shorting the stock or working with put options. If the stock does recover bullish momentum and manages to break the $102 level, there could be an attractive opportunity to work with the long side by either buying the stock outright or using call options.


  • 29 Jun
    HON is down 12% from this year’s high. Is it time to buy?

    HON is down 12% from this year’s high. Is it time to buy?

    Honeywell International Inc. (HON) is one of the largest industrial companies in the U.S. They’ve been around for more than a hundred years and have been a component of the S&P 500 index since 1964. This is a bellwether stock with global operations that, like most U.S. companies, has ridden the market’s long-term upward trend to post amazing highs. It hit a low point below $27 in February 2009 but from that point began a steady climb that peaked in January of this year at almost $165 per share. That’s an increase of more than 500% over that period that anybody would have been thrilled to get a piece of. Since that point, however, the stock has dropped back about 12%, which in the longer-term context probably doesn’t sound that alarming. It does, however beg the question: is the run over, or is this just another example of an opportunity to “buy the dip” and ride the next wave?

    Fundamental measurements for this company are, not surprisingly, quite solid in most respects. As I’ll demonstrate below, however, I believe the stock is highly overvalued by most reasonable metrics. Being overvalued by itself doesn’t, of course mean the stock is destined to keep dropping; however when you consider that the stock is down since January, but remains overvalued does suggest there is still plenty of room to keep dropping. Add in to the mix that the company is among the companies that really stand to be negatively impacted by a trade war – they have operations all over the world, with more than 50% of their sales being generated outside the United States. The longer the U.S. and its trading partners remain at odds and choose to escalate trade tensions rather than finding a way to negotiate their way to compromises, the more the risk that companies like HON could see their stock prices continue to fall.



    Fundamental and Value Profile

    Honeywell International Inc. is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. The Company’s Aerospace segment supplies products, software and services for aircraft and vehicles that it sells to original equipment manufacturers (OEMs) and other customers. The Home and Building Technologies segment provides products, software, solutions and technologies that help owners of homes stay connected and in control of their comfort, security and energy use. The Performance Materials and Technologies segment is engaged in developing and manufacturing materials, process technologies and automation solutions. The Safety and Productivity Solutions segment is engaged in providing products, software and connected solutions to customers that manage productivity, workplace safety and asset performance. HON has a current market cap of $108.4 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings and sales both increased, with earnings growing a little over 17% while sales increased about 9.5%. Growing earnings faster than sales is difficult to do, and is generally not sustainable in the long term, but it is also a positive mark of management’s ability to effectively maximize the company’s business operations.
    • Free Cash Flow: HON has very healthy free cash flow of more than $5.2 billion over the last twelve months. This is a number that has climbed steadily on a yearly basis going all the way back to the last quarter of 2011.
      Debt to Equity: the company’s debt to equity ratio is .72, which is a pretty conservative number. Their balance sheet shows operating are sufficient to service their debt, with plenty of cash and liquid assets to make up any shortfall and provide additional financial flexibility.
    • Dividend: HON pays an annual dividend of $2.98 per share, which at its current price translates to a dividend yield of 2.05%.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for HON is $23.80 per share. At the stock’s current price, that translates to a Price/Book Ratio of 6.09. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Industrial Conglomerate industry is only 3.7, and even more importantly, the historical average for HON is 4.6. A value at par with the industry average would put the stock at around $88 per share, and at its historical average it would be $109.48. That means that from a value standpoint, the downside risk is either 25% or nearly 40%, depending on which metric you prefer to use. Either way, the stock is clearly overvalued and would be very hard to justify as any kind of value-based investment.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

    • Current Price Action/Trends and Pivots: The red, diagonal line traces the stock’s upward trend trend dating back to October of last year. It is also the basis for calculating the Fibonacci retracement lines on the right side of the chart. The stock has been holding practically on top of the 38.2% retracement line since April, and could be forming a third consecutive pivot low at that level right now. This could mark the beginning of a Triple Bottom formation, which is usually taken as a positive, bullish pattern; however the stock would have to break above the $152 level, which I’ve marked with the dashed yellow line and is which has also been acting as powerful resistance for the the past four months. A break above that level should provide bullish momentum to as far as $165, which is around the stock’s all-time highs. A break below $142, which is where the stock’s current support lies should be taken as a good indication the stock is indeed reversing its long-term upward trend.
    • Near-term Keys: If the stock breaks below $142 as just mentioned, and some of the broader market’s trade war and other global risks remain in place, I believe the stock could easily drop to as low as $128 before finding any kind of significant support. A drop to that level would also translate to a legitimate downward trend that could keep the stock dropping to somewhere between $105 to $110 per share – which would match the current minimum downside risk my earlier value analysis suggests. These could be opportunities for shorting the stock or working with put options. If the stock does recover bullish momentum and manages to break the $152 level, there could be an attractive opportunity to work with the long side by either buying the stock outright or using call options.


  • 28 Jun
    DISH: Dead cat bouncing, or incredible bargain?

    DISH: Dead cat bouncing, or incredible bargain?

    Consumer trends can be a fascinating thing to watch, despite the fact that sometimes they are fickle. That’s because sometimes those trends can give you important clues about the viability of certain products or ways of approaching business. It’s easy to get caught up in the excitement of a new, groundbreaking technology, for example, but if the buying public doesn’t buy it, it doesn’t matter how great the tech is; it isn’t going to stick around for very long.

    In the 1980’s, my parents bought a video tape player for the family. We were excited because we could finally watch movies in our home without having to wait for network TV to broadcast them for us. The player was a Betamax player, and my dad went to great lengths about why Betamax players were superior to the VHS players we had been hassling him about. And it’s true, it was a terrific piece of machinery, and I thought that the quality of our home recordings, and of movie tapes in general, was far better than any comparable VHS tape.

    The thing was, not many other people felt the same way – or cared enough to make Betamax more than a passing fad. By the beginning of the 1990’s, Betamax was a thing of the past. We still had our player, and the tapes with our home recordings, but guess what we had sitting right on top of it? You bet – a VHS player, and all of the movies we bought to keep at home were VHS tapes. If you invested back then in Betamax development, you probably lost a lot of money.



    The same idea can be applied to very mature businesses as well; the advent of one kind of new technology often means that a previously lucrative and growing technology becomes obsolete. That is especially true if the new technology is widely adapted and erodes the consumer base the older technology relied on. Cable and satellite broadcasting is one of those mature technologies that consumer trends show may be looking at the end of its usefulness in the not-so-distant future. More and more customers of all ages are “cutting the cord” with traditional television viewing in favor of on-demand, web-based streaming services. It’s a trend that has built Netflix (NFLX) into a media powerhouse with a market capitalization larger than the Walt Disney Company (DIS) and has traditional broadcasting networks scrambling to find ways to evolve and survive.

    Dish Network Corporation (DISH) is among a number companies in the Media industry that finds itself at a crossroads, with a still large, but dwindling subscriber base that requires attention and a high level of service and quality, but a desire to redirect its business to evolve with the needs of a changing business landscape. The market has seen the numbers about their eroding customer base and has treated the stock accordingly, driving it into a clear downward trend for the past year that has seen it lose approximately 50% of its value over that period. A clear loser in the scope of broader market performance, the stock has actually rebounded almost 16% since the beginning of June. Contrarian, value-oriented investors might be tempted to bet on a reversal of the stock’s long-term downward trend, but others would be more cautious.

    “Dead cat bounce” is a term that investors like to use to describe what happens sometimes when a stock in a long, downward trend finds support and starts to rally higher. Generally speaking, the only way a long-term downward trend can manage a legitimate reversal is if the market sees a very strong fundamental reason to start buying the stock. Often, a stock experiences that downward trend for very good reasons, and in the case of DISH, an eroding customer base is one of those very good reasons. The problem the company has in reversing the trend is that the erosion isn’t to competitors in the same business; it’s coming from a “sea change” in consumer habits and preferences that typically marks the death of one business model in favor of another. The “bounce” comes when technical traders start to buy the stock at a low point, hoping for a quick, short-term gain in the stock’s price; but since there is no fundamental reason for other investors with a longer-term perspective in mind to jump in, that gain is extremely limited in both size and duration.



    The argument long-term investors might have for DISH, and that the company is absolutely trying to communicate to the market, is the way they have decided to evolve their business. Since 2008, the company has spent more than $11 billion buying wireless spectrum frequencies in order to build their own 5G wireless network. Their founder and CEO relinquished his role as chief executive at the end of 2017 to focus on developing that part of the business. The challenge is that the company is generating zero revenue from the licenses they hold, and they won’t begin to see any return on their already large and ongoing investment until they complete the buildout of their network sometime in 2020. So is DISH a “dead cat bounce” that only a fool would try to work with, or a real bargain opportunity? Here’s a few numbers to consider that might help you make your own decision.

    Fundamental and Value Profile

    DISH Network Corporation is a holding company. The Company operates through two segments: Pay-TV and Broadband, and Wireless. It offers pay-TV services under the DISH brand and the Sling brand (collectively Pay-TV services). The DISH branded pay-TV service consists of Federal Communications Commission (FCC) licenses authorizing it to use direct broadcast satellite and Fixed Satellite Service spectrum, its owned and leased satellites, receiver systems, third-party broadcast operations, customer service facilities, a leased fiber optic network, in-home service and call center operations, and certain other assets utilized in its operations. The Sling branded pay-TV services consist of live, linear streaming over-the-top Internet-based domestic, international and Latino video programing services. The Company markets broadband services under the dishNET brand. The Company makes investments in the research and development, wireless testing and wireless network infrastructure. DISH has a current market cap of $7.7 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings and sales both declined modestly, with earnings decreasing at a slightly greater rate (almost 8%) than sales (6%). In the last quarter EPS actually increased almost 23% while sales declined about 1%.
    • Free Cash Flow: DISH has very healthy free cash flow of more than $2.2 billion over the last twelve months, despite its decline from a little over $2.4 billion in late 2017.
    • Debt to Equity: the company’s debt to equity ratio is 2.07, which is high; levels at 1 or below are preferred. However, the company’s balance sheet indicates operating profits are more than adequate to service the debt they have, with adequate liquidity from their cash flow to provide additional stability and flexibility. High debt to equity ratios are also pretty normal for this industry.
    • Dividend: DISH does NOT pay a dividend, which is normal for stocks in the Media industry.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for DISH is $15.69 per share. At the stock’s current price, that translates to a Price/Book Ratio of 2.14. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Media industry is 2.2, and the historical average for DISH is 6.53. The stock would have to move above $100 to be at par with the its historical average. While I believe that is an over-optimistic target on even a long-term basis, it does suggest that the stock’s 52-week high, which was $66 in July of last year, is useful and within striking distance over time.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

     

    • Current Price Action/Trends and Pivots: The red, dotted diagonal line traces the stock’s decline and concurrent downward trend for the past year. The stock has been rebounding since the beginning of this month but is now pushing directly up against that downward trend, which should push the stock back down to retest its recent pivot low around $29. A drop back down from that line, to around $31 would be a good sign that the “dead cat bounce” effect is at play. On the other hand, a push above the line to the $35 level, or better, $36 should give the stock some good short-term momentum to push up to the $40 level. That’s a range that short-term traders could find useful for a bullish trade. The stock would have to break above $40 to mark a legitimate reversal of the long-term downward trend.
    • Near-term Keys: Look for the stock to break above $35 per share. A move above this level could be a good opportunity to enter a bullish trade, either by buying the stock or working with call options. A move below $31, on the other hand could suggest the stock’s downward trend will reassert itself and push the stock even lower than $29, which could be a good opportunity for a bearish short-term trade by either shorting the stock or working with put options.


  • 27 Jun
    GILD is setting up for a big bullish move

    GILD is setting up for a big bullish move

    At the beginning of May, shares of Gilead Sciences Inc. (GILD) dropped about 10% overnight when the stock posted much lower-than-expected earnings for the first quarter of the year. The stock kept falling as low as nearly $64 before finally finding support. The stock has staged a nice little short-term upward trend since that point, moving almost 10% higher from that point as of this writing. Overall, the stock is down only marginally for the year (about 3% from the beginning of January) but is still far below its high in late January at nearly $89 per share. Given the the stock’s underperformance from the last quarter, is it realistic to expect the stock to rebound and reclaim those highs?

    Working against the stock is the reality that sales and earnings have both decreased over the last twelve months as well as the last quarter. Much of the decline for the past year appears to have been tied to lower revenues from hepatitis C (HVC) sales, where prices have been forced lower amid shorter treatment durations along with increased competition. The decline in that segment is somewhat offset by increases in sales for HIV and other antiviral drugs, which are expected continue through 2018. Recently, the European Commission approved GILD’s Biktarvy HIV-1 treatment, opening the door for that drug to be marketed throughout the European Union, a positive that should only boost that segment’s business even further.



    It’s true that the Pharmaceutical and Biotechnology industries within the Healthcare sector can be volatile, and GILD’s price movement since the beginning of the year is certainly illustrative of that reality. I believe the key when you’re looking for good investing opportunities in this area of the market is to focus on how broad-based a company’s business is, what their balance sheet actually looks like, and where the stock currently sits relative to previous price action. GILD is one of the largest players in the Biotech industry, with a drug portfolio that spans a pretty wide range of human disease. Other positives include a very strong fundamental base and compelling value proposition. Let’s dive in and see what the numbers reveal.

    Fundamental and Value Profile

    Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in areas of unmet medical need. The Company’s portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions. Its products for HIV/AIDS patients include Descovy, Odefsey, Genvoya, Stribild, Complera/Eviplera, Truvada, Emtriva, Tybost and Vitekta. Its products for patients with liver diseases include Vemlidy, Epclusa, Harvoni, Sovaldi, Viread and Hepsera. It offers Zydelig to patients with hematology/oncology diseases. Its products for patients with various cardiovascular diseases include Letairis, Ranexa and Lexiscan. Its products for various inflammation/respiratory diseases include Cayston and Tamiflu. It had operations in more than 30 countries, as of December 31, 2016.GILD has a current market cap of $91.6 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings and sales both declined, with earnings decreasing at a greater rate (nearly 38%) than sales (almost 22%). In the last quarter both areas declined about 14%.
      Free Cash Flow: GILD has very healthy free cash flow of more than $10.5 billion over the last twelve months, although it has declined from a little over $19 billion at the beginning of 2016. On a Free Cash Flow Yield basis, however, it has remained pretty consistent, with this measurement actually increasing somewhat over that period from about 10.8% to 11.5% as of the last quarter.
    • Debt to Equity: the company’s debt to equity ratio is 1.32, which is a little high; levels at 1 or below are preferred. However, the company’s balance sheet indicates operating profits are more than adequate to service the debt they have. High debt to equity ratios are also pretty normal for this industry.
    • Dividend: GILD pays an annual dividend of $2.28 per share, which translates to an annual yield of 3.22% at the stock’s current price.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for GILD is $15.84 per share. At the stock’s current price, that translates to a Price/Book Ratio of 4.42. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Biotechnology industry is 5.4, and the historical average for GILD is 7.74. The stock would have to reach $85 to be at par with the industry average, and $122 to meet its historical average.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

    • Current Price Action/Trends and Pivots: The red, diagonal line traces the stock’s decline and concurrent downward trend from the end of January through the beginning of May. This line also serves to calculate Fibonacci trend retracement levels, which you can see on the right side of the chart. It’s also pretty easy to see the stock’s nice upward rally from its low around $64 over the last month and a half. That rally has also produced a good-looking, upward stair-step pattern that has given the stock the momentum to drive to its current price. The stock is not quite $4 away from its nearest resistance around $74 per share, and in the near-term I would expect that level to provide some resistance to mute the stock’s current rally. If that resistance is broken, the next most likely resistance levels occur at about $77 and $80, respectively, but since the break above $74 would mark a continuation and strengthening of the stock’s upward trend, their resistance could be muted. Beyond $80, there would be little to stop the stock from moving into the $85 to $90 range. The stock is working with strong support in the $69 to $70 range, and a break below this level would likely see the stock move quickly back to its 52-week low around $69.
    • Near-term Keys: Look for the stock to break above $74 per share. A move above this level would be solid confirmation to enter a bullish trade, either by buying the stock or working with call options. A move below $69, on the other hand would be a good opportunity for a bearish short-term trade by either shorting the stock or working with put options.


    By Thomas Moore Biotechnology Investiv Daily
  • 26 Jun
    EMN dipped below $100 today. Is it a good buy?

    EMN dipped below $100 today. Is it a good buy?

    Trade tensions seem to have finally caught up to the market, as the last week has prompted investors to start selling. Despite today’s rally, the S&P 500 is off about 2.2% from a high point around 2,788 earlier this month. Those tensions have particularly followed U.S. stocks that do a significant portion of business overseas, and even more specifically those with major exposure in China. EMN fits that description; as of March of this year, the company estimated that 28% of its business came from the Asia/Pacific region, with the lion’s share of that business in China. That has pushed the stock off of its all-time highs around $110 in the last couple of weeks to its current price. A drop of about 10% in price marks a significant retracement and correction of the stock’s long-term trend, which is still more than 50% higher than it started a year ago. The stock is approaching an important support level that could mark a major turning point for investors.

    I think that despite the stock’s getting solid fundamental profile, and recovery to the stock’s previous highs is anything but a given, especially given the preference shown so far by both the U.S. and its trading partners to escalate trade tariffs. The market abhors any kind of conflict that could impact trade, and so I think the near-term risk for stocks like EMN is that the absence of satisfactory resolutions is going to limit their upside. The larger risk is that those tensions could force prices even lower and push these stocks into longer-term downward trends. EMN is very close to what I think it is an important signal point that investors can use to plan their strategy in either direction.



    Fundamental and Value Profile

    Eastman Chemical Company (Eastman) is an advanced materials and specialty additives company. The Company’s segments include Additives & Functional Products (AFP), Advanced Materials (AM), Chemical Intermediates (CI), and Fibers. In the AFP segment, it manufactures chemicals for products in the coatings, tires, consumables, building and construction, industrial applications, including solar energy markets, animal nutrition, care chemicals, crop protection, and energy markets. In the AM segment, it produces and markets its polymers, films, and plastics with differentiated performance properties for end uses in transportation, consumables, building and construction, durable goods, and health and wellness products. The CI segment leverages large scale and vertical integration from the cellulose and acetyl, olefins, and alkylamines streams to support its specialty operating segments. Its product lines in Fibers segment include Acetate Tow, Acetate Yarn and Acetyl Chemical Products. EMN has a current market cap of $142.6 billion.

    • Earnings and Sales Growth: Over the last twelve months, earnings grew almost 22% while sales grew about 13%. Growing earnings faster than sales isn’t easy, and over time isn’t really sustainable, but it is also a positive mark of management’s ability to maximize their business operations.
    • Free Cash Flow: EMN has generally healthy free cash flow of $939 million over the last twelve months. This number has improved markedly since June of last year, when free cash flow was a little over $650 million.
      Debt to Equity: the company’s debt to equity ratio is 1.12, which is a little high; levels at 1 or below are preferred. However, the company’s balance sheet indicates operating profits are more than adequate to service the debt they have.
      Dividend: EMN pays an annual dividend of $2.24 per share, which translates to an annual yield of 2.22% at the stock’s current price.
    • Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for EMN is $39.40 per share. At the stock’s current price, that translates to a Price/Book Ratio of 2.55. Ratios closer to 1 are usually preferred from a value-oriented standpoint, however higher multiples aren’t that unusual, especially in certain industries. The average for the Chemicals industry is 2.8, and the historical average for EMN is 3.0. That translates to about 15% upside in the stock right now, which would push its price a little above its 52-week highs.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

    • Current Price Action/Trends and Pivots: Since early March, the stock has operating within a range between about $100 on the low side and $110 on the top end. The chart above uses the red diagonal line to trace the stock’s upward trend from August of last year to its peak in March, and then calculate Fibonacci retracement levels. Today’s movement has the stock possibly breaking the first level of Fib support. That’s interesting, but the real signal is at the next level, shown as the 50% retracement level (technically not a Fibonacci number, but still often an important level of emotional price activity) at around $97 per share. That range also coincides with the stock’s long-term trend line as calculated by a 200-day moving average and which is taken by technical traders as an important indicator of the stock’s long-term trend. The stock could use that level as support anywhere between its current price and $97, which would generally confirm the long-term trend. On the other hand, a break below $97 could mark a critical reversal point where the long-term trend shifts from up to down.
    • Near-term Keys: Watch the stock’s activity between $100 and $97 per share. A pivot back to the upside, with a push above $101, would certainly suggest the stock should at least push back into the $110 range and could offer a good short-term bullish trade by buying the stock or using call options. A break below $97 would probably not see any kind of pause in downward momentum until about $93 per share, or in more extreme cases, possible as low as the $85 to $86 range. If you don’t mind working with downward price patterns and trends, that could be an opportunity to short the stock or to work with put options.


  • 25 Jun
    “Buy the Dip” is a terrific, time-proven bullish strategy – has its time passed?

    “Buy the Dip” is a terrific, time-proven bullish strategy – has its time passed?

    No matter whether we look at the market and economy with a short or long-term perspective, and no matter what method we usually use to make money in our investments, as investors we are all limited by our inability to see the future. Since we can’t see or know what’s going to happen, we’re left to do our best at making semi-educated guesses using imperfect information. That also means relying on historical data to make forward-looking decisions like what to do with our money. We assume that because a certain method, strategy, or technique worked under certain conditions in the past, it should work again now, or in the future when conditions appear similar.

    There are a lot of investing techniques and strategies out there, and a lot of the most popular ones use a really catchy turn of phrase so you can remember them easily. “The trend is your friend” is one that I learned early in my investing career to help me determine which direction, bullish or bearish, my trades should generally be taking. Another one that has been really popular for the last few years is “buy the dip.” This is one that worked out really well for short-term traders all the way through 2016 and 2017. Here’s what I mean. The chart below is for the SPY, which is an exchange-traded-fund (ETF) that tracks the movement of the &P 500 index.

     

    The green diagonal is a good reference for the market’s long-term trend line during the two-year period shown here. “Buy the dip” means that whenever the stock market experiences a short-term drop – how much really depends on the individual’s preference, and can be a percentage from the last high, a total number, or a visual reference such as the one I’m using here – it’s really an opportunity to buy in and ride the next wave higher. If you’re a short-term trader, using a trend line like the one I’ve drawn would have provided an excellent reference point. I’ve highlighted four difference points over the last two years where a drop to or near to the trend line provided a really good entry point for a bullish trade. While you can’t buy the index, you can trade options on it, or you can work with an ETF like the SPY to go long on the stock or to use call options at a lower cost than index options would carry. If you buy on these kinds of dips, you would hold for as long as the market is showing solid bullish momentum, and then sell when you see the next short-term dip. Taking that approach on any of these four entry points would have generated excellent profits.



    Another approach that really became popular during this period is what you’ve probably heard called “passive investing.” It also relies on the same kind of signals for an entry, but then suggests that since the market is going to experience the same kind of short-term ebbs and flows, all you really need to do is find the next entry point and then ride the next several waves higher. If you were fortunate enough to get in on the dip in July 2016, around $201 and then followed the passive investing mindset, by the end of 2017 you would have been looking at almost $70 per share in profit from the SPY. That’s a two-year return of almost 34%! It’s really no wonder that so many people gravitated to passive investing using ETFs or stock index mutual funds like the Vanguard 500 Index Fund during this time; it really seemed like the market was a no-brainer, can’t-miss kind of investment.

    The problem that underlies methods like passive investing, or even the normal “buy the dip” mentality is that most investors lose the discipline to pay attention to signals that the market is changing. It usually means they just assume the upward run will never end, and the latest drop is just another “dip” in the latest series of dips before it picks up again. That puts the average investor at big risk when the broad market experiences the kind of rare, “sea change” shifts that only come along once or twice a decade. The last economic cycle that ended in a recession in 2008 is a perfect example.

    As with the last chart, I’m using the green diagonal for the market’s long-term trend from late 2002 through the beginning of 2008. The blue circles highlight terrific “buy the dip” points that had a lot of people thinking the market was just going to keep going up forever. The red circle highlights a dip in the latter part of 2007 that by all appearances looked like just another dip in the longer trend, but really proved to be just the last desperate gasp of momentum the market had left. At the beginning of 2008, the SPY dropped below its long-term trend line and found a temporary bottom around $132 per share. That’s about a 9% drop from the entry around $145 that most “buy the dip” traders were taking in late 2007, and should have been a clear signal to exit the trade and cut your losses. If you didn’t recognize that signal, your loss could have been much, much bigger since the market didn’t find a bottom until early 2009, when the SPY was around $67 per share. That’s a drop of nearly 54% if you rode it all the way to bottom, and didn’t get reclaimed until late 2012. That’s the kind of loss, and extended, protracted recovery that most traders that love to “buy the dip” when the times are good can’t handle.



    One of the big keys to being successful with any investing strategy, no matter whether it works on a short-term basis or with a long-term perspective is really less about when you buy a stock than it is about when you sell. Smart “buy the dip” investors will usually sell when they see the market staging short-term weakness that could become a longer-term downward slide. That locks in their profits and opens up the opportunity to buy in again on that next dip, hopefully at a low point. Acting quickly on taking profits also would have the advantage of getting you out of the market before a “last gasp” rally turns into a market reversal.

    The danger remains, however that could buy a dip expecting just another upward thrust, but ultimately see the market reverse right after you got in. That’s why it’s also important to pay attention to trends and recognize that when the market drops below major, long-term trend lines, the risk of a “sea change” reversal is incrementally higher than normal. If you bought the last dip in late 2007, for example, it would have been much better to recognize the drop below $140 for what it was. Even if you didn’t get out until the market found a temporary support point around $132, an 8% loss on that trade would have been far easier to deal with than riding the SPY all the way down to $67 hoping for an eventual turnaround.



    Okay, now let’s take all of that and talk about what the market is doing now. As of this writing, the market is down about 3% from its last high about two weeks ago. Is that just another “dip” that investors should treat as a buying opportunity, or maybe something more serious. Let’s take a look.

    The green diagonal line is, once again our proxy for the market’s long-term trend, with the dotted blue line acting as visual reference for its short-term trend. “Buying the dip” would have been really profitable if you bought in April, and dips in the early part of May, and then again late that month would have also have yielded some decent short-term gains. Notice that the index has dropped below that short-term trend line as of today. If it turns back to the upside, that could be another good short-term signal, but it also should be taken as a warning sign that it’s time to be a little bit cautious. Are we looking for a major, “sea change” kind of reversal? Not yet; but it’s also true that the index is just a short distance – less than 5%, in fact – away from the long-term trend line. A drop below $260 per share in the SPY is exactly the kind of signal that “buying the dip” is going to put you at an increasing risk of being on the wrong side of the market, at exactly the wrong time.

    What if the market proves the naysayers wrong yet again? The problem with the long-term trend right now is that the market’s activity since late January has forced that trend to flatten out, meaning that it is losing momentum and strength. Short-term traders who recognize this reality won’t necessarily stop trading, but they will usually act even more quickly than normal to close out winning trades and lock in profits than they might be to let their winners run. The fact is that until the market moves past its all-time high, reached in late January when the SPY peaked at almost $287 per share, it’s hard to make any kind of substantive case for any kind of continued bullish rally that would extend this bull market past its current nine-year run and possibly into the next decade.


  • 22 Jun
    Is NWL’s stock depressed, or undervalued?

    Is NWL’s stock depressed, or undervalued?

    One of the things that has marked this bull market since 2009 has been the role the Federal Reserve has played in facilitating the economy. Even as the Fed has begun raising rates while also working to reduce its balance sheet, it has made a point of taking a gradual, incremental approach that is designed to strike a balance between encouraging growth and preventing it from going too fast. 

    One of the normal benchmarks the Fed and most analysts use to gauge economic activity is the Consumer Price Index (CPI). The complete index covers all items that you and I purchase, including food and energy products. Since those items – groceries, gasoline, and so on – tend to be less cyclical in nature, a second measurement excludes those items. The Fed has previously indicated it is using annualized growth in this number of 2% on average as its target for healthy economic growth. As of the last report, published in May, CPI (less food and energy) growth for the trailing twelve months was 2.2% – somewhat higher than the Fed’s target, but generally within the range it has indicated it is willing to keep working with. The implication is that the economy is growing at a modest pace that should be sustainable for the time being.

    There are always risks to economic growth, no matter what the numbers say. Geopolitical issues have a way of increasing concerns and worries in a way that can bleed into consumer habits and trends. Trade tensions between the U.S. and China, Europe, Mexica and Canada could certainly result in an increase in the prices of practically every type of consumer goods, no matter how much the Trump administration asserts that tariffs imposed up to this point are being intentionally structured to shield consumers.



    In the case of Newell Brands Inc. (NWL), the stock’s price trend over the last year is also symptomatic of additional risks tied to the company. Over the past year, sales have declined while earnings have been flat. The trend for both of these items is on the decline, however, as earnings in the most recent quarter decreased 50% versus the quarter prior to it, while sales decreased by more than 19% over the same period. Not only is this pattern in direct contrast to the generalized economic growth I just described using the CPI, it also runs counter to the industry trend, where earnings have generally grown. NWL’s stock has suffered, declining from a high near to $55 in June of last year to the stock’s current price around $26.

    Another indication to the average investor that all may not be great at NWL is the fact that activist investor Carl Icahn several months ago began quietly acquiring a large enough stake in the company to begin agitating for change. That led the company to forge an agreement with Icahn and fellow Starboard Value, an activist hedge fund, that allowed them to nominate five of their own people to Newell’s board. Activist investors generally get involved with a business when they see opportunities to change the business model, and that can be a good thing; but it generally doesn’t happen when everything is going well.

    Value-oriented investors can look to a few critical fundamental items that could indicate the stock is a very good bargain right now; and frankly that is part of the reason that investors like Icahn and Starboard get involved. If you think these activist investors can be successful in transforming NWL’s business, getting in right now could be a good opportunity. A successful turnaround, however is never a given, and the result they are working for could require a very long-term perspective on your investment. If you’re looking to make a quick buck with a profitable short-term trade, NWL probably represents a high-risk, low-probability investment right now.



    Fundamental and Value Profile

    Newell Brands Inc. is a marketer of consumer and commercial products. The Company’s segments include Writing, Home Solutions, Commercial Products, Baby & Parenting, Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions. Its products are marketed under a portfolio of brands, including Paper Mate, Sharpie, Dymo, Expo, Parker, Elmer’s, Coleman, Jostens, Marmot, Rawlings, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Rubbermaid, Contigo, First Alert, Waddington and Yankee Candle. Writing segment consists of the Writing and Creative Expression business. Home Solutions segment designs, manufactures or sources and distributes a range of consumer products under various brand names. Commercial Products segment designs, manufactures or sources and distributes cleaning and refuse products. Its Baby & Parenting segment designs and distributes infant and juvenile products. NWL has a current market cap of $12.8 billion.

    Earnings and Sales Growth: As already observed, over the last twelve months, earnings were flat, while sales declined. Most analysts forecast a further decline in sales and earnings through 2018 of about 3 to 3.5%.

    Free Cash Flow: NWL has generally healthy free cash flow of a little over $418 million over the last twelve months. This number has decreased since the beginning of 2017, when it was a little above $1.8 billion, which could be taken as an additional red flag.

    Debt to Equity: the company’s debt to equity ratio is .68, a conservative, generally manageable number that has declined from a little above 1 in the middle of 2016. The company’s balance sheet indicates their operating profits are more than sufficient to service their debt.

    Dividend: NWL pays an annual dividend of $.92 per share, which translates to an annual yield of 3.49% at the stock’s current price.

    Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for NWL is $29.20 per share. At the stock’s current price, that translates to a Price/Book Ratio of .9. A Price/Book ratio below is usually a good sign for a value investor, and comparing it to its historical average of 4.4 suggests that the long-term opportunity could be enticing. A rally to above $100 per share, which would have to happen for the stock to approach its historical Price/Book average is unlikely given that the stock has never risen above about $56 per share; but it does suggest those historical highs are within reach. If you believe in Icahn’s and Starboard’s methods for “enhancing shareholder value,” this is as clear an indication of where the opportunity lies as any.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

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    Current Price Action/Trends and Pivots: The diagonal red line traces the stock’s downward trend since July of last year. While that trend hasn’t reversed, it has lost its bearish momentum, since the stock has been hovering in a very narrow range since February, with support in the $25 range and resistance around $28 per share. The interesting thing about sideways trends like the one illustrated by the horizontal, dotted red and blue lines is that the longer they last, the more likely a major trend reversal becomes. For the impatient, short-term investor, that doesn’t inspire a lot of enthusiasm, but for long-term oriented investors looking for bargain opportunities, this is a very attractive technical setup.

    Near-term Keys: The bullish case is pretty simple to make. A break to $29 per share will require significant upward pressure and momentum; if and when it happens, the stock could easily move into the $39 to $40 range within a matter of weeks. That break would mark the earliest sign of a major trend reversal and would provide an optimal bullish entry point for trend or swing traders. If you are a value-oriented investor with a long-term time frame, and don’t mind waiting for the break, or even to endure a little more negative price pressure in favor of the long-term view, this could be an excellent time to consider taking a position. If the stock breaks its support in the $25 range, there is about $7 of downside risk to be aware of before the stock is likely to find additional support. That could also translate to a decent short-term opportunity for a short sale or a bearish put option trade.


  • 21 Jun
    STX is up 37% for the year. Will it keep going?

    STX is up 37% for the year. Will it keep going?

    Investing in the year 2018 has been markedly different than it was in 2017. Where it seemed like last year you practically couldn’t miss the mark – everything was going up – this year has seen a lot of uncertainty bring volatility back into the marketplace. A lot of well-known stocks have been fortunate to tread water, and if the last week is any indication there could be more pain ahead.

    Seagate Technology PLC (STX) has been one of the rare exceptions, a star performer that is hovering just a few dollars below multi-year highs. After hitting a low point in October of last year around $30 per share, the stock has rallied to just below $59 as of this writing, peaking in April around $62 before sliding back to its current price. Perhaps that 60%-plus performance since that low point is fitting, given that the stock endured some pretty wide swings in price during 2017 to finish the year at a modest net gain of about 8%.

    Even as trade war fears roil the markets and spook investors, technology has generally remained one of the most in-favor sectors of the market this year. That has certainly played into STX’s favor, and of course that momentum could continue into the foreseeable future, especially as investors gravitate towards stocks with limited perceived exposure to tariff-exposed regions of the world. That could lead investors to keep buying STX, which is headquartered in California despite being incorporated in Ireland. There is some risk, however, since the last quarterly report indicates that only 29% of the company’s revenues come from U.S. sales. There is pretty big exposure to Asia, with 54% of revenues coming from that region (a deeper breakdown by country isn’t provided) and 17% from Europe. All told, approximately 71% of the company’s total revenues have come from regions that are being directly targeted by U.S. tariffs. I think there is far more downside risk than upside potential for STX right now, which I’ll outline below.



    Fundamental and Value Profile

    Seagate Technology public limited company is a provider of electronic data storage technology and solutions. The Company’s principal products are hard disk drives (HDDs). In addition to HDDs, it produces a range of electronic data storage products, including solid state hybrid drives, solid state drives, peripheral component interconnect express (PCIe) cards and serial advanced technology architecture (SATA) controllers. Its storage technology portfolio also includes storage subsystems and high performance computing solutions. Its products are designed for applications in enterprise servers and storage systems, client compute applications and client non-compute applications. It designs, fabricates and assembles various components found in its disk drives, including read/write heads and recording media. Its design and manufacturing operations are based on technology platforms that are used to produce various disk drive products that serve multiple data storage applications and markets. STX has a current market cap of $16.8 billion.

    Earnings and Sales Growth: Over the last twelve months, earnings increased by almost 33% while sales grew only modestly, at about 5%. It’s hard to grow earnings faster than sales, and in the long term isn’t really sustainable; even so, I generally take this as a positive sign that management is effective at maximizing their business operations.

    Free Cash Flow: STX has generally healthy free cash flow of a little over $1.5 billion over the last twelve months. This number has increased from a little under $1 billion in the last quarter of 2016.

    Debt to Equity: the company’s debt to equity ratio is 3.17, a high number despite its decrease from a little over 4 in the quarter previous. The company’s balance sheet indicates their operating profits are more than sufficient to service their conservative debt levels, with healthy cash and liquid assets available as well.

    Dividend: STX pays an annual dividend of $2.52 per share, which translates to an annual yield of 4.3% at the stock’s current price. Not only is that remarkable for a tech company, most of which don’t pay any dividend at all, but this is also well above the industry average.

    Price/Book Ratio: there are a lot of ways to measure how much a stock should be worth; but one of the simplest methods that I like uses the stock’s Book Value, which for STX is $4.75 per share. At the stock’s current price, that translates to a Price/Book Ratio of 12.32. This is as clear a sign to me as any other of the stock’s overpriced status, since the stock’s historical average is only 6.0, and the industry average is only 4.5. The implication here is that the stock is priced more than twice as high as it should be under normal market conditions. Very few value-based investors would be willing to consider buying this stock at a price of more than $28 to $30 per share.



    Technical Profile

    Here’s a look at the stock’s latest technical chart.

     

    Current Price Action/Trends and Pivots: The diagonal green line traces the stock’s upward trend since October of last year. That trend has been providing solid support for the stock for the past month; however since March the stock has held within a range at the top of the trend. Support is in the $55 range, with resistance around $60. The stock is currently sitting approximately the middle of that range right now.

    Near-term Keys: The stock’s all-time high was reached late in 2014 at around $66.50 per share, which implies that even if the stocks breaks above its current range, its near-term upside is very limited. On the other hand, a break below $60 would probably not find immediate support until somewhere between $50 and $52 per share. Beyond that point, the stock’s 52-week low around $30 is not out of the question – especially if the company’s revenues and profits are negatively affected by extended trade tensions between the U.S. and its trade partners.


    By Thomas Moore Investiv Daily Technology
  • 20 Jun
    Will DKS break out, or break down?

    Will DKS break out, or break down?

    At the end of May, Dick’s Sporting Goods (DKS) released its latest quarterly earnings report, and the numbers soundly beat Wall Street’s expectations. That spurred the stock, which had been mostly range-bound since the beginning of the year, to break out in a big way, with an overnight move of more than 26% to around $38 per share. More →

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