Monday, January 14, 2013
Goodbye ACI
Closed out ACI for a 13% loss on the position. Held this position for several months and it could never hold a rally. Time to cut the losses and free up some capital for healthier stocks such as OPEN and SODA.
Book Club: How I Made $2,000,000... by Nicolas Darvas
How I Made $2,000,000 In The Stock Market by Nicolas Darvas is a fantastic book that all traders/ investors should read. It is easily read and the message is simple: The only reason to own a stock is that its price is rising and there is no reason to sell a rising stock.Darvas outlines his trading plan as this:
1. Find Relative strong stocks (52 week highs, stocks holding steady while market sells off, so on...)
2. Buy starter position in stock as it rises above a basing pattern with heavy volume.
3. Let stock base again.
4. Buy more stock as it rises above new basing pattern, repeat.
5. Sell all stock if it falls into lower previous basing pattern range using stop order.
This method allows you to cut your losers short, ride a trending stock and built big positions in stocks that are working, and have a defined exit to secure profit.
There are a million books that outline this same trading plan, but this may be the most effectively written because it provides a story of how Darvas came up with his trading plan and why it works. This type of writing is more powerful than textbook writing and will allow the reader to naturally absorb the trading methodology.
This book is highly recommended for everyone!
Back from the Dead and to Work
Back in the office after having the flu all week. FARO and ALGN have gotten hit hard. FARO on news its Senior Vice President was being eliminated. No news on ALGN but definitely don't like to see so much weakness on a failed breakout of the $29 level. I will have a tight leash on these positions if I don't see significant strength in the next day or two. I still like the story of these stocks, but obviously the price action is telling me I'm wrong for now. I will look to reallocate assets into OPEN which is performing well on its breakout of $50 and SODA which looks ready to breakout above $50 as well.
Thursday, January 3, 2013
Top Stocks for 2013: #1 OSIS
OSI Systems provides the screening equipment for baggage, parcels, people and trucks to airports, docks and truck stops across the world. As travel and dangerous technology becomes more available to the world, there will need to be many more places incorporating screening equipment such as schools, stadiums, malls and so on.
The stock has recently sold off from around $80 to $50 due to an accusation of malfeasance made to the TSA about machine performance. The safety performance is not the issue (3:00 mark), it was the privacy software that turned the full body scan images into stick figures. During the hearing, the TSA agent says that he suspects OSIS manipulated the operational test but confirms that there were independent studies conducted that verified OSIS claims (2:10 mark). Even if TSA does eventually find proof, both Oppenheimer and Benchmark believe the impact on OSIS would be minimal.
OSIS has a FPE of 16, PEG of 1, little debt, and an EPS expected growth rate of over 25% for the next 5 years. With these fundamentals and being the leader in an industry I expect to grow significantly this year and the next several years, I think OSIS has potential to be a 10 bagger in the next decade from its current valuation of $1.3 billion. 2013 end of the year target is $120, an 85% rise from current levels. Stop beneath $60 then look to reenter.
The stock has recently sold off from around $80 to $50 due to an accusation of malfeasance made to the TSA about machine performance. The safety performance is not the issue (3:00 mark), it was the privacy software that turned the full body scan images into stick figures. During the hearing, the TSA agent says that he suspects OSIS manipulated the operational test but confirms that there were independent studies conducted that verified OSIS claims (2:10 mark). Even if TSA does eventually find proof, both Oppenheimer and Benchmark believe the impact on OSIS would be minimal.
OSIS has a FPE of 16, PEG of 1, little debt, and an EPS expected growth rate of over 25% for the next 5 years. With these fundamentals and being the leader in an industry I expect to grow significantly this year and the next several years, I think OSIS has potential to be a 10 bagger in the next decade from its current valuation of $1.3 billion. 2013 end of the year target is $120, an 85% rise from current levels. Stop beneath $60 then look to reenter.
Wednesday, January 2, 2013
Top Stocks for 2013: #3 SIRO and #2 ALGN
I love the dentist! Not because it is an enjoyable experience (though it is vastly improving every year) or because it makes me healthier and more attractive. No, I love the dentist because the dental industry is an industry that is going to explode with the improvement in life quality for billions of people worldwide. As billions of Chinese and Indians join the middle class they are first going to try and improve their appearance and their health. The dental industry, and specifically SIRO and ALGN, are perfectly positioned from this boom.
Sirona Dental Systems, SIRO, provides the dental equipment, while Align Technology created Invisalign. Invisalign is the next generation of braces where they 3D scan your teeth and 3D print clear molds for your mouth to gradually straighten your teeth. Millions of teenagers world wide will owe ALGN their eternal love for saving them from mangled cheeks, excrutiating braces tightening at the dentist office, and walking around with half your lunch stuck between your braces.
SIRO has made a significant move this year, but with a FPE of 17 I think this stock can trade to $95 (FPE of 25). This would indicate an upside of 46%. I would place a partial stop beneath 60 and another full stop beneath 55, risking about 10% on the first half of your money and 15% on the 2nd.
ALGN missed earnings and sold from $40 to $25. I like buying in the $25-$28 range with a stop beneath $22, risking about 17%. With a FPE of 23, I think this stock can easily return to its high of $40 and even reach $50 by end of year for a return of 75% from current levels.
I see SIRO and ALGN as major long term positions (several years) and part of a major theme I want to be invested in long term. I think 2013 is the year to begin building positions in the dental industry and as of now these two stocks are my favorite.
Sirona Dental Systems, SIRO, provides the dental equipment, while Align Technology created Invisalign. Invisalign is the next generation of braces where they 3D scan your teeth and 3D print clear molds for your mouth to gradually straighten your teeth. Millions of teenagers world wide will owe ALGN their eternal love for saving them from mangled cheeks, excrutiating braces tightening at the dentist office, and walking around with half your lunch stuck between your braces.
SIRO has made a significant move this year, but with a FPE of 17 I think this stock can trade to $95 (FPE of 25). This would indicate an upside of 46%. I would place a partial stop beneath 60 and another full stop beneath 55, risking about 10% on the first half of your money and 15% on the 2nd.
ALGN missed earnings and sold from $40 to $25. I like buying in the $25-$28 range with a stop beneath $22, risking about 17%. With a FPE of 23, I think this stock can easily return to its high of $40 and even reach $50 by end of year for a return of 75% from current levels.
I see SIRO and ALGN as major long term positions (several years) and part of a major theme I want to be invested in long term. I think 2013 is the year to begin building positions in the dental industry and as of now these two stocks are my favorite.
Portfolio Update: OPEN, PRLB and BWLD Purchased
I began building a position in OPEN today on the recapture of the $50 level. My plan is to build this position by scaling in on pullbacks to the 50 day, looking for a major move this year as the heavy (33%) short float gets squeezed and investors see the massive potential for this business model.
I made a support level buy of BWLD with a stop beneath recent support only to be immediately poleaxed by the descending 50 day moving average as the stock touched this resistance and sold off 3% to be one of the 7% of stocks that were negative half way through the day. 2013 may be my lucky year because I may be bailed out of this weak stock due to the after hour announcement that SAC Capital has acquired a 5% position. My target for BWLD is $90, but I definitely believe this company has the fundamentals and brand name to trade well over $100 in the next two years.
I bought a small amount of PRLB due to it showing up on my fundamental finviz screens, breaking above the $40 resistance and also being related to the high PE expansion being seen in 3D printing stocks. Once again I instantly regretted this decision as the stock knifed lower and went negative on the day. This doesn't concern me like BWLD did since PRLB has run so much so fast and is due for a price or time correction. I am a buyer of PRLB in the 30s, especially the $34-36 range.
Current Portfolio
ACI
AIG
ALGN
BWLD
DDD
FARO
ONVO
OSIS
PRLB
SIRO
SSYS
XRX
I made a support level buy of BWLD with a stop beneath recent support only to be immediately poleaxed by the descending 50 day moving average as the stock touched this resistance and sold off 3% to be one of the 7% of stocks that were negative half way through the day. 2013 may be my lucky year because I may be bailed out of this weak stock due to the after hour announcement that SAC Capital has acquired a 5% position. My target for BWLD is $90, but I definitely believe this company has the fundamentals and brand name to trade well over $100 in the next two years.
I bought a small amount of PRLB due to it showing up on my fundamental finviz screens, breaking above the $40 resistance and also being related to the high PE expansion being seen in 3D printing stocks. Once again I instantly regretted this decision as the stock knifed lower and went negative on the day. This doesn't concern me like BWLD did since PRLB has run so much so fast and is due for a price or time correction. I am a buyer of PRLB in the 30s, especially the $34-36 range.
Current Portfolio
ACI
AIG
ALGN
BWLD
DDD
FARO
ONVO
OSIS
PRLB
SIRO
SSYS
XRX
Welcome to 2013, You're Rich!
Futures are opening at major resistance and I'm a seller up here. I'll look to scale out of positions and build cash for breakouts in OPEN, SODA and AIG in the next few weeks. This 60 handle rally in SP Futures is over done.
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