|Stock||Initiated Watch||Portfolio||Continue Watch?|
|FOSL||05/22/2011||Buy Pick||Initiated Position|
The market did not have the tremendous bounce back on Tuesday, May 24 as we had expected, but some buying definitely seems to want to start to come into the market as the dollar weakened slightly and a lot of stocks continued to show very attractive technicals. We are continuing our watch on Humana (NYSE:HUM), Omnivision (NASDAQ:OVTI), and SCO/UCO. We are removing our watch on EMC after the stock dropped below a key 50-day MA, and it seems to have broken the support that originally attracted us to it over the weekend after two days of pulling back.
We still like Humana as the stock actually made a small pullback and seems on a great support line now. The stock jumped right off of its 20-day MA today and has a very bullish technical candle today. HUM continues to be an attractive defensive company and on a stronger up day, HUM would represent a nice, safe opportunity.
Omnivision has continued to show strength moving into earnings that are supposed to be significant, and if we can get a sustained day up, we would be a buyer.
We initiated a position on Fossil (NASDAQ:FOSL) yesterday after a pullback from its highs on more strength.
Buy Pick Portfolio:
Take-Two Interactive (NASDAQ:TTWO): With a number of buy picks on our immediate radar, one stock that could be ready for a move tomorrow and forward is Take-Two Interactive. Earlier in the day, we signaled to our clients that this stock could be ready for a major overnight with earnings coming this afternoon. The stock could be setting up for a breakout if earnings are spectacular. This stock made some nice moves throughout the beginning of the year after a great 2010 with Red Dead Redemption and NBA 2K11. The company has two large releases again coming out this summer in Duke Nukem and LA Noire, and overall, this stock looks springloaded to pop after earnings. We think earnings exposure is not a bad thing to have, and along with that, a break above 17.50 could signal another breakout. We would be a buyer above 17.50.
Short Sale Portfolio:
LinkedIn Corp. (NYSE:LNKD): We are waiting for LinkedIn puts to become available because we want some. This stock is grossly overvalued. How much did LinkedIn make in 2010? $15M. How much can they make in five years? I am not sure that much more. The company makes money through advertisements and paid subscriptions. Yet, the company is not an employment facilitator or head hunter. They made their business by being the Facebook of the professional world. We don't see the upside... Further, it appears the trend agrees. Lots of marketmakers and analysts have commented that this valuation is much too high, and these puts could fly up very fast. Some speculation is they will be available tomorrow. Thus, we are watching for them. Given our analysis on a DCF, the stock is worth around $45 - $50. That is if they can 1000% in the next five years. Not completely unattainable. Yet, they would need around $600M - $700M in operating income to justify this price in five years. Who else has that much operating income? Intuit (NASDAQ:INTU), JC Penney (NYSE:JCP), and nearly no website-based business.