In this new feature, SA contributors highlight stocks investors should watch today for unusual movement, with their bias (long/short), and a brief explanation of why.
Stocks are listed alphabetically. Once the market opens, you can track how today's "Stocks To Watch" are performing here: http://goo.gl/ZDerOQ.
The name of the author of each Stock To Watch can be found after the name of the stock and his/her bias. Clicking on a contributor's name takes you to more articles by that contributor.
To send in your own ideas for tomorrow's Stocks To Watch, email firstname.lastname@example.org before 6:00 AM ET tomorrow.
Most authors follow comments actively, so if you have a question, ask it in the comment stream or direct message the author if you prefer.
- AMD could dip following news it released an underwhelming APU: A10-7800, instead of catering to the budget crowd with an A8-7600.
- Delaying low-end budget Kaveri hurt stock.
- Despite setbacks, AMD could shoot higher (above $5) as investors anticipate strong earnings (July 17 2014) over the next ten days.
Advanced Micro Devices (AMD) – long – Sean Chandler
- AMD is a trading dream machine for many ahead of earnings, which will be held next week, Thursday.
- The stock’s 52-week high is the result of a rally right before earnings almost one year ago.
- AMD is in the middle of a sophisticated turnaround and has shown solid execution since it began. Investors may become optimistic and cause another rally right before earnings.
- Aluminum prices will help a solid and profitable company.
- Alcoa is transforming into a value-added company.
- This niche medical device manufacturer has been range bound, gyrating around $16.00 since October 2013. Several recent analyst upgrades, new FDA approvals, and a wealth of good news reports set ANGO up for promising share performance.
- Technical indicators show ANGO is in the final completion of an inverse head and shoulders top and ready for a breakout from its current $15.90 to well over $17.00 and could test recent highs of $19.00 or beyond even.
- Option trades are also available for those who prefer to focus on the technical momentum for strangles, straddles, collars, and other strategies based on the completion of the inverted head & shoulders top.
Apple (NASDAQ:AAPL) - long - Point Of Return
- Apple recently hired a former LVMH sales director (rumored to be VP Sales and Retail for Tag Heuer, Patrick Pruniaux) to launch the iWatch.
- Wall Street is getting more excited for what’s expected to be a fall product blitz from Apple (including the thinner and bigger iPhone 6).
- Shares just hit a new 52-week high yesterday.
Atlantic Power (NYSE:AT) - short - Albert Alfonso
- AT has been drifting higher, up nearly 40% in the past few weeks.
- There has been no material news released to justify this move.
- Due to its extremely weak fundamentals (negative FCF, excess debt) and very likely upcoming covenant breach, AT is a possible short candidate.
BlackBerry (NASDAQ:BBRY) - long - Point Of Return
- Shares rose 5.7% to $11.21 yesterday, the highest close since Sept. 9 on more than 38 million shares, almost three times the average daily volume in the last three months.
- BlackBerry has now gained ~35% since better-than-expected earnings were announced June 19.
- Investors are starting to buy into CEO John Chen’s turnaround plan (cut costs, sell assets, and preserve the $1.2 billion cash).
- Bob Evans owns 562 restaurants in 19 States as well as BEF Foods, a leading producer and supplier of pork sausage and related food products composing 30% of BOBE total revenues.
- BOBE has been embroiled in a battle with its activist investor, hedge fund Sandell Asset Management which wants the BEF unit spun off to realize full value. Company management has been unable to come to terms with Sandell and a fight for control of the board is expected to emerge. This is the era of "activist investor" value additions and establishing a position at this time is win/win regardless of tomorrow’s earnings release. A weak result will empower Sandell even more; a strong result is unlikely to diminish Sandell, especially if strength is from BEF. Strong results from the restaurant side still bode well for the shares, so the report has virtually only good news in the offing for future developments.
- With shares trading in a consolidation pattern just above a very strong $50 support level, this is a good time to establish an entry point. Covered options can be used to discount the entry price, boost the 2.5% dividend yield, and lower market risk even further.
Cirrus Logic (NASDAQ:CRUS) - short - Ken McGaha
- CRUS shot higher by 5.13% Monday on no significant news, creating the opportunity for a pullback on Tuesday.
- The company has shown no signs of stemming its continuing loss of sales to Apple (AAPL).
- On Monday, Samsung Electronics reported a drop in earnings of more than 22% from last year's comparable quarter which will weigh on the supplier chain for smartphones. CRUS is scheduled to release earning on July 23rd and investors will take advantage of Monday's rise to sell.
Cliffs Natural Resources (NYSE:CLF) - long - Illuminati Investments
- Cliffs issued an open letter to shareholders yesterday after the market close, urging them to vote for existing management over an "inexperienced" slate of new nominees in a proxy contest.
- This continues an ugly war of words with Casablanca Capital, who has accused existing management with destroying $9B in value.
- Cliffs should continue to be volatile as this battle for control of the board of directors rages, but compromise before or resolution at the company's Annual Meeting on July 29th should help the situation stabilize and the stock rebound, as long as iron ore prices do the same.
ConocoPhillips (NYSE:COP) - long - David Fish
- Expected Dividend Increase (in coming week or so) should be an improvement on last year's increase (4.55%).
- Stock will yield above 3.5% and be attractive vs. peers.
- Company should indicate the likelihood of continued strong earnings growth.
Delta Air Lines (NYSE:DAL) – long – Sean Chandler
- Delta Air Lines closed 4.4% lower yesterday on high volume following an announcement, according to TheStreet, to reduce the number of flights to Venezuela over a dispute of trapped cash in the country.
- After showing steady, continuous growth since the end of 2012, Delta’s closing price of $36.90 puts it at almost 15% below its recent 52-week high.
- This is the largest dip following a new 52-week high since the steady growth trend began, and could represent a decent entry point for those looking to accumulate or enter a long-term position.
- After a 4.4% selloff on Monday, look for shares of Delta to rebound this trading session.
- The company is trading at 13.5% below its 52-week high and has a PE of 10.5x 2015 earnings estimates, so this selloff could present an opportunity for long-term investors.
Delta Air Lines (DAL) - short - Point Of Return
- Yesterday Delta announced an 85% reduction in its service to Venezuela.
- With the threat of rising oil prices, and the World Cup hampering business travel to Latin America investors took profits yesterday, locking in gains since DAL has doubled over the past year.
- Delta is due for a pullback - investors should view this as a short-term sell.
- BCE, Telus (NYSE:TU), and Rogers (NYSE:RCI) are once again in the limelight after the Canadian government plans spectrum sales for smaller carriers to boost competition.
- The firm already has high cost pressures from its CTV division, and faces integration risks with Astral Media.
- Rich dividend supports stock price, but deceleration in profit growth will pressure stock in 2014.
- Doral Financial is a holding company for Doral Bank, a provider of retail banking services. Deteriorating performance numbers have driven shares down from $24.98 in July of last year to a present $6.13.
- A huge jump from $4.11 to $7.87 (91.5%) on July 2nd was the result of over-exuberance related to a favorable tax ruling for the company. The appellate court ruling simply forces the lower court to hold a hearing in which the Puerto Rico Dept. of Treasury will be required to prove its basis for voiding its agreement with Doral. Even a ruling reinstating the agreement would have no effect on the long-term recurring performance metrics.
- Share prices should return toward or even lower than the pre July 2nd levels as the limited effect of the ruling becomes clear and the company continues to show under-performance in its metrics for continuing operations.
Family Dollar (NYSE:FDO) – short – Prescient Investment Analysis
- Stock had lagged due to poor fundamentals and moved up over 10% on news of Carl Icahn stake.
- Icahn’s immediate strategy is to seek a buyer; it takes years for a capable activist to turn a company around.
- Dollar General, at the top of prospective purchasers' list, has had its CEO resign.
Gencorp (GY) - long - Richard Berger (no position, may initiate long)
- Gencorp is a well established veteran aerospace & defense company dating from 1915.
- The recent merger of Orbital Sciences (ORB) & Alliant Techsystems (ATK) signals the start of M&A consolidation of the space products and services industry.
- Gencorp, with its long history, profitability, and low P/E of 8.3 makes it a good candidate for merger in the near future as part of this industry rationalization with a 50% upside premium considered a reasonable expectation.
GT Advanced Technologies (GTAT) - long - Bill Maurer (no position, may initiate long)
- Shares fell on Monday due to two downgrades, but those analysts' price targets now represent significant upside.
- Shares are now about 20% off their recent high and closed Monday just under the 50-day moving average.
- With roughly 35% of float short at last short interest update, any rebound could make a short squeeze possible.
GT Advanced Technologies (GTAT) - long - Brad Kenagy (no position)
- GT Advanced Technologies received two downgrades on July 7th, with one of the firms downgrading the stock questioning the agreement they have with Apple (AAPL) to produce sapphire for the iPhone 6 screen.
- These two downgrades coupled with the questions about the Apple agreement led to shares falling 15.6%.
- With the large drop, GT Advanced Technologies could see a nice recovery bounce.
GT Advanced Technologies (GTAT) - short - Richard Berger (no position or plans)
- Downgraded Monday by UBS from Buy to Neutral on a forecast the company will fail to meet its high end $600 to $800 million 2nd qtr sales guidance, shares have plunged from the July 2nd high of $20.64 to close at $16.54 (a 15.6% dive).
- Technically, the shares exhibit the forming of a classic head and shoulders top, the left side neck consolidated at $15.50 to $16.50 from June 1st until its June 11th breakout to $17.47. Head formation continued in the $18.50 range (peaking at $20.64). The current plunge now returns to the prior neckline and bodes further collapse to test support at $14.69 (or even $14.00) level. It may consolidate there or fall even further.
- Firm support could be as low as $8.00.
Himax Technologies (NASDAQ:HIMX) – long – Prescient Investment Analysis
- Himax (HIMX) has sold off drastically, beyond being cut in half, since March.
- Analyst downgrades are part of the equation, but have sunken in since June 24th.
- Why today? The stock pays an annual dividend, now yielding over 4%, and goes ex-dividend on the 9th.
- The only driver is a probable takeover.
- ISLE has made a possible top and it appears that a small correction is in the cards.
- Macquarie Infrastructure Company has agreed to purchase the 50% stake in International-Matex Tank Terminals that it does not already own in a cash and stock deal.
- IMTT owns a number of sizable bulk liquid storage terminals, which should add value to MIC’s portfolio.
- MIC expects the transaction to be cash flow accretive this year.
- Brazil’s economy is facing challenges with rising inflation triggering rising interest rates while a stabilized USD/BRL currency exchange rate does nothing to stimulate trade with its 2nd largest partner. China, Brazil’s largest trade partner also continues to have a weak and uncertain economic forecast.
- Disappointing preliminary results indicate World Cup results may actually depress national economic activity due to the numerous holidays mandated for cities with cup matches, totaling 9 to 12 added business closure days in the major cities hosting matches. After rallying from March lows of $25.84 to a high of $31.07 on June 11th, shares have not been able to break above that upper resistance level and show signs of weakening now at $30.32.
- Weak technical support exists at $29.00 with firm support next found way down at $26.00. The coming close of the World Cup Games is expected to trigger further political unrest and highlight continuing erosion of the economy. Brazil market outlooks are gloomy.
Market Vectors Israel ETF (NYSEARCA:ISRA), iShares MSCI Israel Capped ETF (NYSEARCA:EIS) - short - Ugly Duckling
- The Israeli ETF will likely face a drop today on the stirring civil unrest.
- Historically TASE-25 has dropped on such days.
- GDP is affected by rocket strikes which shut factories and halt production putting a damper on equities.
- The quiet period expiration for MRD is July 7; on July 8, MRD's lengthy, impressive list of underwriters will likely attempt to push the stock higher with positive reports.
- MRD has had a solid market performance post-IPO in the current environment favorable to energy IPOs.
- We see MRD's quiet period expiration as another buying opportunity for an already strong stock. Additional details here.
Molycorp, Inc. (MCP) - short - Richard Berger (no position or plans)
- Molycorp is a tired rare earth experiment running out of cash and with ineffective management. The company is on pace to run out of cash by 1st Qtr 2015. Management is considering a supplemental share offering of an additional 350 million shares.
- Already down 49.7% since May 1st , shares have more downside potential and very little upside except hope and prayers. With a gap down almost 12% overnight on July 2nd and still off over 9% mid-day, the shares clearly have plenty of ability to serve up big short profits.
- The company position and its repeated failures to design and implement an effective strategy for long-term viability are even worse than 2 years ago. Even if management were to achieve its repeatedly failed targets, China remains in control of pricing power and can insure no profits for its competitors for the next 100 years.
- In just the past 10 days at least 12 law firms have announced shareholder class action suits against OPTT & its board of directors for fraud. On June 10th, CEO Charles Dunleavy was fired “for cause” according to the company and media reports.
- Even if the company should eventually prevail, the distractions of this massive litigation will effectively cripple its already floundering position.
- Shares have fallen from a March 11th $7.01 high to a close of $1.68 Monday. Further erosion is expected. Near-term upside is virtually non-existent.
Omeros (NASDAQ:OMER) – long – Prescient Investment Analysis
- The stock has consistently made outsized moves, Monday’s 8.74% drop is consistent, it could gap up immediately.
- Monday’s dip is not based on material news, and at 11% off its 52 week high it is a buyable opportunity.
PACCAR (NASDAQ:PCAR) – short – Prescient Investment Analysis
- Stock was up nearly 5% after rumored Volkswagen buyout offer.
- Volkswagen has denied the story.
Pacific Ethanol (NASDAQ:PEIX) - long - Eric Landis
- Fundamentals continue to improve as corn and natural gas futures fall to multi-month lows.
- The stock has been in a strong uptrend as it has made a nearly 50% move off of the recent May 9th low following disappointing Q1 earnings.
- Q2 earnings estimates should be easily beaten on the back of reduced debt, increasing production, and negligible warrant fair value adjustments.
- Penford supplies natural food based ingredients and specialty packaging.
- Shares jumped 7.75% Monday after pre-market earning release showed favorable results.
- A deeper look shows much of the reported earnings boost is from non-recurring factors unlikely to sustain the inflated share price. A significant portion of the 7.75% gain can be expected to be devalued in coming days and weeks.
- Pengrowth should bounce back after suffering a 3% loss on Monday.
- The stock price has been trending higher over the past few weeks and was due for a pullback.
- Buy the dip since PGH has great fundamentals heading into Q2 earnings thanks to higher Canadian energy prices.
- Pure Cycle is a one-stop water industry for the Denver Metro Area, involved in all phases of water supply, distribution including wholesale & retail sales as well as designing and managing water systems for 3rd parties from construction thru billing account management. It also leases out company owned farms for cash and sharecrop.
- PCYO is largely tied to the Colorado economy which is doing well and forecast to continue so. Rapidly rising food commodity prices also will boost sharecrop earnings.
- Current quarter results are due out mid July and with recently raised expectations are unlikely to disappoint. Expect strong price advances to continue this month.
- This Canadian packaging company royalty income fund is a cash cow with a safe 6.81% dividend and growing share price (up 41.45% in 52 weeks).
- Shares have been consolidating around $12.12 since June 24th and I expect a breakout from the current $12.29 to above $13.00 in the very near future based on improving North American and global economic activity which will boost earnings and probably distribution also.
- Improving Canadian dollar/US dollar exchange rates, up over 6% since April and continuing to strengthen, should also further boost performance translated to U.S. dollars.
- Note: Very thinly traded on U.S. market. RPI.UN on Toronto exchange is recommended.
- Shares of Seadrill are likely to fall today after the company announced the planned issuance of a $1 billion convertible bond and launched a tender offer for an existing convertible bond.
- Seadrill has a large debt load and this issuance could raise new concerns about increased leverage.
- Shares have fallen in Oslo trading this morning and the company’s NYSE listing should follow suit in today’s trading session.
- SIR is a cash cow currently at $29.97 with a safe 6.8% dividend derived from rental income on its owned properties in premium markets, principally Hawaii. It is trading at a discount of over 28% from NAV based on private equity firm Lakewood estimates of SIR $40.90-$44.55 per share (see this article for details).
- Open warfare between SIR’s largest shareholder (37%), Commonwealth (CMR) and its own external management RMR (REIT Management & Research) recently resulted in RMR being thrown out as CMR manager. Now CMR turns its attention to RMR’s management of SIR and joins private equity firm Lakewood in seeking big changes in the SIR trustees.
- Since Lakewood went public with an open letter to SIR trustees on June 11th, shares have been rallying strongly, up $1.16 (5.7%) in the subsequent 17 trading days through July 7th.
SodaStream (NASDAQ:SODA) - short - Bill Maurer
- Another setback in the UK hurts the company's growth strategy.
- Stock hit new 52-week low on Monday.
- With lower Bollinger Band declining, stock may not have bottomed yet.
SolarCity (NASDAQ:SCTY) - short - Bill Maurer
- A recent rally, which looks to have been partly due to a short squeeze, has come to an end.
- After a 65% rally in about a month, shares have pulled back 10% already.
- Stock needs to pull back another $2 plus just for a 1/3 retracement.
- Shares have struggled since the 1st Qtr 2014 results released May 14th, dropping from a May 15th close of $25.61 to $23.34 by June 10th. Two attempted rallies have resulted in a double top failing to break resistance at $24.50, most recently on June 24th. Since that time, prices have continued rapid erosion to the present close of $23.20, having now fallen through the $23.22 support level.
- The next support level is $21.00 to $21.26, marking a targeted gain potential of $1.94/share (8.4%).
- Early economic statistics from Brazil’s World Cup hosting suggest as much as a 30% drop in economic activity (due to business holidays in each city on game host days). Add in no net gain in tourism over normal seasonal averages and this distributor and retailer of consumer goods and fuels is set to see even harder hits.
Valero Energy (NYSE:VLO) - long - Albert Alfonso
- Valero is down 15% since its May highs.
- The stock should report a decent Q2 thanks to wide crude oil differentials in the U.S. central corridor (PADD 2).
- With a sub 5x EV/EBITDA, VLO is dirt cheap and is due for a bounce.
- Shares had their worst day in months on Monday with no news.
- After a $10 pullback, stock seems ready to rally again.
- With roughly 35% of float short at last short interest update, further short squeezes are possible.