Hello all. Good Wednesday. What a great day we had yesterday with our Buy Pick of the Day DSW Inc. and our Short Sale of the Day Career Education Corp. Additionally, our Overnight Trade worked out wonderfully for us this morning. We got involved with Exide Technologies (XIDE) at 3.85 yesterday, and we sold this morning at 4.12. That was a great gain of 9% that we made on XIDE. Hope some of you were able to get involved on the great trade. Our Buy Pick of the Day was worth 3% with a buy at 27.00 and a sale at 27.71. Our Short Sale of the Day was worth 2.5% with a short at 29 and a cover at 29.28. Finally, our other open position, from Monday, is our Play of the Week in Big Lots Inc. (BIG). We bought into this one at 36.50, and we are at just about even now after losing quite a bit yesterday.
Hope you were able to take advantage of some of those great positions. We are looking to continue our success with another Overnight Trade today. Attached on the right is a follow-up to yesterday’s Daily Musing, which I think is just interesting to see that Apple is one of the lowest in R&D, but one of the most successful…interesting.
Overnight Trade: Verifone Systems Inc. (PAY)
Analysis: Verifone Systems (PAY) is today’s Overnight Trade of the Day. I am pretty excited about this company as I was Exide (XIDE) yesterday. Verifone is an payment solutions company that has developed a secure electronic payment register for merchants and produced the payment system that the iPhone uses to buy applications and many other products. The company is in an industry with few competitors and has seen a lot of success and growth over the past year. I believe the company will continue to impress with their earnings report in after hours today. The company is projected to report an EPS of 0.26 vs. one year ago’s 0.17.
Technology is one of those industries that, as I said yesterday with Exide, has done fairly well in this Q1 of 2010. Companies are beginning to revamp their reinvestments into technology to increase profitability and reliability. Payment systems have done exceptional in this past quarter. Business equipment has seen 5/6 of the major comapnies produced surprise profits over the past month. Verifone’s competitors, Hypercom (HYC), NCR (NCR), and Ingenico have all produced huge surprises on earnings. HYC was at 300% and NCR was above 200%. Verifone is extremely well positioned in this market and the market leader. The company makes a margin everytime someone pays for something based on how expensive something is. PAY has developed a lot of high end clients and mixed that with some great growth areas in the USA and BRIC countries. They are the sole leader in registers and payment systems in Brazil, which is such a growing market with people starting and using credit cards and debit cards.
I am confident in this company, and they tend to underestimate earnings. The company upped their earnings estimates to 0.25 – 0.26 EPS after last quarter’s earnings. The company has seen great growth over the past year, which should continue into this quarter. Over the past four quarters, they have increased, sequentially, their revenue, their profits, their cash, and otal assets. The company has reported 0.26 EPS for three straight quarters, but they are looking to increase revenue by another 3-4% in this quarter over last, and they should be able to beat that 0.26 EPS. The company took on a lot of new stock in Q4 of 2009, which reduced EPS. They did not in Q1 of 2010, and so, it should increase over 0.26.
The surprise will help, but I also think the company has some great future prospects. They are heavily involved in the BRIC, Switzerland, the USA, and Germany. The strong European nations and the growth of those emerging markets is a great virtual portfolio. Further, the company has tons of free cash flow on hand. They consistently have between $50 – $70 million in free cash flow every quarter. That is money that can be used for expansion and development.
Finally, another great sign that this is a company that can definitely continue to shine is that they are receiving upgrades. One of these came from the S&P back in March. The S&P commented the company has a lot of growth potential, great liquidity, and a strong market position. The upgrade from the S&P is a sign of great future growth, and I think that should begin to shine in this quarter.
The reason this makes for such a great play is not all just strong fundamentals, but also the technicals of the market. The company is very undervalued. It is only at 75% of its 52-week high. PAY is right at its lower bollinger band, it is oversold, and it is undervalued on RSI. The company has made some movement upwards today on the good day, but you would have to expect some movement upwards on such a great market day. I have adjusted entry to try to maximize our gains. The company has about 20% to the upside to its higher bollinger band, and it has dropped over 10% in just the past two weeks on just market movement. This is a strong company that is undervalued.
Get in now and let’s hope for some great returns.
Entry: We are looking to enter between 17.25 – 17.40.
Exit: We are looking to exit tomorrow morning at the open after earnings have been released.
Oxen Alert – New Post
I have a new report for an Overnight Trade of the Day. It is in Verifone Systems (PAY). We are looking for entry at 17.25 – 17.40 and an exit tomorrow morning. Yesterday’s OTD was worth 9%, so we are hoping for some more of the same success from PAY today.
You can read my analysis and more about PAY here.
Thanks and Good Investing!
Oxen Alert – Entry/Exit
PAY – We are involved at 17.25. We are looking to exit tomorrow morning at the open unless otherwise specified. I would not mind exiting PAY for a 4-5% gain today if that occurs. If it does, we may consider an exit, but I highly doubt that would happen.
Daily Musing is on its way…
I got in at 17.50. Hope I’m not too late to the party!
That is a bit of a premium on the 17.25 area I was looking at, but I think this one has potential tomorrow. If it does what I am expecting, then you will be happy with 17.50 for sure!
Terrific pick…. I have been watching this one for awhile, and have positions long term. Have sold the puts @15 for either a nice pop, or will add to my longs through assignment, and happy either way
Glad to have you on board and thanks for the comment!
David … when do you plan to move out of BIG?
David, Haven’t seen it in your range for hours. Out about $18 doesn’t sound too good now $17.67!
I am going to move out of BIG for a 4-6% movement. I entered at 36.50, so I am looking at around 37.95 and up. I am obviously holding into earnings tomorrow. I am expecting big news.
Yeah. I would look at entering if gets below 17.60. Otherwise, that premium is just too high for risk to reward.
I have a new Daily Musing written. Usually I post right with the story, but it did not fit because it was too long. It is available for your reading now here. The Musing is about the oil market and its market failures. It is part of a 3 part series that I am going to be doing on the failures of oil and then solutions I offer up about how to fix it and alt. energy.
Thanks and Good Investing!
Hey D, I got into XIDE but I thought it was an earnings play and earnings are not until June 3rd…… Havent sold yet, would you recommend holding or selling?
They changed their earnings to June 3rd yesterday. Briefing and Yahoo both had it as today yesterday. Today, it is changed. I would just sell. Why risk it in this market that could drop at any moment? You are up like 10% right?
Great place to start picking up some shares of PAY!!!
Great earnings from PAY:
I was up a decent amount but held and now am back to even (was in class and didnt have time to sell). I bought some July calls so I paid a little premium. Marketwatch said they announced their earnings date for June 3rd on May 13th… I appreciate your picks and not trying to give you sh!t, just suggesting maybe crossreferencing with Marketwatch.
Yeah. I started crossing with Yahoo after this happened last time. I will check like everywhere now to make sure. Thanks for the help.
PAY up 4% in afterhours.
Unless the market tanks, this one could run to $19 in the short run…
Very true. Let’s hope we get some nice news out of jobless claims and GDP then.
David, not sure what you think, but this market seems to very hard to day trade. Too many large gap up and down at the open the last couple of weeks. By the time you get involved, they need to be faded. You almost need to get involved with after hours trading. These overnight trades (or swing trades in the week) seem like the best recipe if you pick the right direction.
Imo it’s quite alright that the market is volatile. David usually has both long and short picks, so if market moves in a certain direction it may diminish one pick but should (theoretically) help the other. That being sad I am not a fan of day trading as it requires too much "babysitting" a particular stock and my schedule simply doesn’t work well with those, but those 2-4 day swing trades are great. Personally, I buy stocks with an intent to close position within 1 week to 1 month and I find that David’s picks usually just compliment what I do since I have some funds available at all times to be used for whatever.
Personally, I love volatility. It is what makes any day trades very good. At the same time, I look at the long term and medium term. I am starting to do on Friday afternoons a super long term financial analysis of various companies that are good options. I think there will be great day trades in any market, and we just have to find them.
Appreciate the comment.