My trading strategy is based on buying companies with improving fundamentals at proper technical buy points. I explain this concept in the blog Warren Trades. My best trades have something in common: the stock has a solid fundamental and technical picture before I buy it.
This is the list of companies I am currently observing in order to buy them as soon as they break key resistance levels with above-average volume. In the article I detail the fundamental catalyst that makes me interested in the stock.
Home Loan Servicing Solutions (HLSS)
Barclays recently upgraded HLSS to Overweight from Equal Weight and gave a new target of $21 from $15 as Barclays believes that earnings growth from funding cost improvements and accretive portfolio acquisitions is not fully reflected in the stock price. In September HLSS reported Q3 earnings of $0.37 per share, $0.03 better than the Capital IQ consensus estimate of $0.34 while revenue came strong at $28.5 million in comparison to the expected $27.65 million. I think investors are pleased with HLSS' results for the quarter, which exceeded the company's guidance primarily because lower-than-expected prepayments reduced amortization.
I will wait for the shares to create a consolidation level and buy as soon as HLSS breaks $19,75 with increased volume.
Vitamin Shoppe (VSI)
VSI recently reported Q3 (SEPT) earnings of $0.54 per share, $0.08 better than the Capital IQ consensus estimate of $0.46 while revenue rose a strong 14.4% year/year to $239 million vs the $234.66 million consensus. The increase in revenue was the result of: 1) a 9.6% increase in comparable-store sales, 2) growth from new stores, and 3) a 16.9% increase in e-commerce sales. I like this stock and I think it will break the key $62 level sooner than later.
I will buy when VSI clears the $62 level with above-average volume.
In a recent report, Needham raised its CRM target to $180 from $160. Needham's analyst spent one week talking to customers and partners at Salesforce's mega user conference, Dreamforce. The report explains that there's significant enterprise enthusiasm around a number of newer products, which gives Needham incremental confidence to predict premium growth rates and accelerated share gains through the foreseeable future for CRM.
I will buy as soon as CRM clears the $150 level with strong volume.
Beazer Homes (BZH)
Beazer Homes explained at Deutsche Bank's Leveraged Finance Conference that it is building communities faster than expected this year and the company will spend more on land in FY13. Housing-related stocks are strong and I think they will keep this strength for 2013.
I expect BZH to break the $18.50 level with strong volume. I plan to buy at that level.
Millenial Media (MM)
MM reported revenue that rose 88% year/year to $47.4 million and the company raised Q4 revenue guidance to $46.5-47 from $43.5-45 million on October 15. Millennial Media also reached a record 380 million monthly unique users globally, including ~150 million monthly unique users in the United States alone. More than 38,000 apps were enabled by mobile app developers to operate on Millennial Media's platform as of September 30, 2012. As of September 30, 2012, Millennial Media has developed more than 300 million proprietary user profiles.
I plan to buy the stock as soon as it breaks the strong trend line that is creating.
United States Steel (X)
Recently The World Steel Association predicted that in 2013, world steel demand will grow by 3.2% from the current 2.2% and reach a record high of 1,455 Mt. The fact that China growth has stabilized makes me think that X will create a bottom at these levels.
I will buy when X clears the current trend line with solid volume.
Expedia shows solid execution, strong organic tailwinds and an aggressive expansion strategy that have allowed the company to gain market share and report record accelerating results despite the challenging macro environment. While the initial stages of the global platform migration have already yielded impressive results, including a significant improvement in the core Expedia brand, Expedia still stands to benefit from the roll-out of its revamped air and package platforms over the next couple quarters. This is one of the best technology stocks.
I will buy EXPE when the stock clears the current trend line of $62 with solid volume.
Las Vegas Sands (LVS)
While current results were below expectations the volume stabilization in Macau shows that the company has gained market share and conditions are not as severe as they appeared in 2Q. I continue to believe LVS is a strong company, with a solid balance sheet and growth prospects, despite the slowdown in Asia.
I will buy LVS when the stock clears the trend line with volume.
YUM Brands (YUM)
Yum recently reported very strong earnings. In the call management highlighted that Yum international segment (YRI) is performing strongly. Also it sees ample opportunities for expansion in France, Germany and Russia. The company had also a strong start in Africa and I believe this region has the potential to be a significant business for YUM. The company also reported improved return on capital in the U.S and management expects to reach its 10% ownership level target of U.S. Taco Bell compared with 22% in 2008, explaining that Taco Bell sales have been strong due to a change in menu and the addition of a dorito taco. After the report, Oppenheimer explained that YUM delivered a solid 3Q12 beat with profit upside driven primarily by U.S. & YRI. Oppenheimer was encouraged to see that management increased 2012 EPS guidance to "at least 13%" from 12%, a sign of confidence in 4Q trends.
I will buy YUM when the stock clears its $73.50 resistance with strong volume.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.