When I feel the euphoria of being up big, I know this is may be a signal to sell, manage the position or at least perform a review to ensure it still makes sense to be long. This is how I've been feeling as of late. Sprint (S) is up 60% since my recommendation to buy the stock two months ago. On the other hand, Zynga (ZNGA) is down 34% since I stated to avoid the stock in the same article. Nokia (NOK) is up 60% since I stated to sell the stock. I definitely missed the boat on Nokia.
Reviewing my positions on a monthly basis is a part of my usual modus operandi. By going back and seeing why you were right or wrong regarding a stock better prepares you to recognize the next opportunity to buy or pitfall to avoid. We can look back and identify what catalyst really produced results, take this information, look for similar scenarios, and attempt to replicate the results. The following is an analysis of five stocks I wrote about two months ago that have had significant moves in recent weeks.
In the following sections we will perform a review of the fundamental and technical state of each company to determine if we should stay with the position, sell out or simply manage the position by taking profits. The following table depicts summary statistics and Wednesday's performance for the stocks. The following charts are provided by Finviz.com.
Micron Technology Inc. (MU)
Micron is up 10% since my recommendation to buy the stock on July 17th. The company is trading 28% below its 52 week high and 48% potential upside based on the consensus mean target price of $9.80 for the company. Micron was trading Wednesday for $6.65, up over 2% for the day.
Fundamentally, Micron has some positives. Micron's projected EPS growth rate for next year is 117.80%. Micron is trading for approximately 83% of book value and 78% of sales. Stifel Nicolaus reiterated their Buy rating on the stock on June 21st with a $9.50 price target.
Technically, Micron looks poised to move higher. The stock has broken out to the upside from a descending triangle formation. The stock has been in a slow and steady uptrend since mid-June. It has breached the 50-day SMA and is set to test major resistance at the 200-day SMA.
Micron is one of my perennial favorite stocks to trade. Last year at this time the stock went on a major run of 45%. They are trading for less than book value and have a significant opportunity to turn the ship around going into a seasonally favorable period for the stock. Now is a great time to start a position in this stock.
Nokia is up 60% since my recommendation to sell the stock on July 17th. Boy, did I get this one wrong. The company is trading 58% below its 52 week high and 13% above its consensus mean target price of $2.53 for the company. Nokia was trading Wednesday for $2.90, down slightly for the day.
Fundamentally, Nokia has some positives. Nokia is trading for approximately 93% of book value and only 25% of sales. EPS next year is expected to rise by 83%. Nokia pays a dividend with an 8.71% yield.
Technically, the stock has rebounded nicely since July and is currently in the beginnings of establishing an uptrend. The stock has continued to post higher highs and higher lows.
Nokia's future looked extremely dim in July. The company practically had to give its phones away at the time. What a difference a couple of months make. The win by Apple (AAPL) over Samsung (GM:SSNLF) regarding handsets seems to have provided an opening for Nokia. With Microsoft (MSFT) backing Nokia things just got interesting for this stock. The risk/reward ratio looks positive for the stock here. The stock is a buy.
Sprint Nextel Corp.
Sprint is up 60% since my recommendation to buy the stock on July 17th.The company is trading 1% above its 52-week high and 10% above the analysts' mean target price of $5.06 for the company. Sprint was trading Monday for $5.60, up over 7% for the day.
Fundamentally, Sprint has some positives. Sprint is trading for 1.69 times book value and only 45% of sales. EPS next year is expected to rise by 43%.
Technically, the stock has been in a solid uptrend for the last few months. The stock has been on a tear since mid-April. In mid-June the stock fulfilled the coveted golden cross which is an extremely bullish technical feat. As you can see, this time the indicator was right on target.
As usual, I took profits too early. I always seem to sell my winners too soon and my losers too late. I was waiting for a pullback to get back on board, but the stock may not cooperate. Merge rumors are swirling around the stock pushing it higher. After the recent price action, I would still wait for a pullback though. Nevertheless, the stock has much more room to run. The company is down over threefold from its 2007 high of a $22 per share. The stock is a buy.
SIRIUS XM Radio Inc. (SIRI)
SIRIUS is up 20% since my recommendation to buy the stock on July 17th. The company is trading 6% below its 52-week high and has 13% upside potential based on consensus mean target price of $2.80 for the company. SIRIUS was trading Wednesday for $2.49, up 2.5% for the day.
Fundamentally, SIRIUS has several positives. SIRIUS has a forward P/E of 22 and trades for 18 times free cash flow. EPS is expected to rise by 25% over the next five years. Quarter over quarter EPS is up tremendously. SIRIUS' TTM ROE is 152% and the company's net profit margin is 107%.
Technically, the stock looks strong. The stock achieved the golden cross about one month ago. This indicator has proven to be extremely bullish.
The stock hasn't moved much since that time. This is an excellent opportunity to get into the stock. I am long SIRIUS at a cost basis of $2.09. SIRIUS is a cash cow with a 100% net profit margin. Sooner rather than later loyal shareholders will be rewarded with buybacks and dividends. The stock is a buy here.
Zynga is down 34% since my recommendation to sell the stock on July 17th. The company is trading 80% below its 52-week high, and has 65% potential upside based on the analysts' mean target price of $5.26. ZNGA was trading Wednesday for $3.19, up almost 4% for the day.
Fundamentally, ZNGA has a few positives. EPS is expected to grow by 57.10% next year and 24% over the next five years. The stock is trading for 1.26 times book value, and has a forward P/E of 28.
Technically, the stock seems to have found a bottom at this level. The stock has been trading sideways since late July. Zuckerberg had some kind words to say about Zynga at the TechCrunch Disrupt event in San Francisco on September 8th. The jury is still out on this name as far as I am concerned. Social media stocks are currently still in their infancy. I would avoid the entire sector until the winners and losers are ultimately decided. It took several years for dot com winner and losers to shake out. Avoid the stock for now.
The Bottom Line
Most of these stocks have been on great runs over the past couple of months. Several of them still have improving fundamental and technical pictures. I see any pullback as a buying opportunity for these stocks and most are buys at current levels. Sprint just popped 7% Wednesday; definitely wait for the stock to cool off some prior to starting a position. The only stock I say to avoid completely is Zynga. I am in wait and see mode regarding this name. If you choose to start a position in any stock, I suggest layering in to reduce risk. Furthermore, set a 5% trailing stop loss to minimize losses further if you wish.