Altisource Portfolio Solutions: Best of the Financial Services Industry Group

by: Joshua Hayes

The financial services-specialty industry group is ranked number 172 out of 197 industry groups based on the past six-months price performance according to Investor's Business Daily. However, despite the ugliness in this overall group, there is one stock that is clearly sticking out as a winner amongst the losers. That stock is Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) from Luxembourg. The company provides real estate mortgage portfolio management and related technology products.

This stock is on fire, despite being in one of the worst performing industry groups in an overall very volatile and downtrending stock market. The reason this stock is doing so well, hitting new 52-week highs on strong volume, can be seen in the EPS and sales growth it has put in the last four quarters. For the past four quarters, YOY EPS growth has come in at 190%, 800%, 140%, and 39%. During that same time, sales growth has been at 22%, 42%, 45%, and 43%. These are incredibly strong numbers that you see in only the highest quality of growth stocks.

Not only are the current numbers fantastic but the estimates for 2010 and 2011 EPS are for gains of 87% and 25% respectively. On top of this, the company sports a Return-on-Equity of 35% and a cash flow of $1.42.

The only negative argument you can make against this stock is that the current P/E ratio is at 23 which is near its all-time high end of the range of 24. However, the history of the greatest stock market winners going back 130 years has proven that the best stocks in the stock market have all had high P/E ratios BEFORE their biggest runs and that P/E ratios are never important in determining when a great growth stock is "expensive" when it is in the early stages of its biggest price runs. The greatest growth stocks with the potential to make investors a lot of money are always going to be "expensive" relative to the market. This is why most investors are never in the greatest stocks and consistently either underperform or keep up with the overall market returns. If you want to make big money in the stock market you have to study the facts of the greatest growth stocks of all-time and not listen to the brainwashing that keeps most investors in a flux of weak returns.

Just as impressive, if not more due to the fact the market is so weak, is the technical situation Altisource Portfolio Solutions S.A. is in. The stock was in a steady uptrend bouncing off the 50 day moving average, since being listed on the Nasdaq, until it began to build a base in March. Despite the market breaking down on heavy volume in May, Altisource Portfolio Solutions S.A. only slightly undercut the lows it set in March. By undercutting those lows on lower volume and then bouncing off the 50 day moving average and breaking out above the April highs, on May 28, it set up and broke out of a properly formed double bottom pattern.

Since then it has created a high handle on lower volume and on Monday broke out of that handle on very strong volume, hitting a new 52-week high, with the Relative Strength line confirming the move with a new high of its own. If Altisource Portfolio Solutions S.A. can now pullback to the pivot point area of the breakout (around the 26.80 to 27.80 area) or pullback to the 50 day moving average on low volume, I would love to start a long position in this stock.

However, we must remember that the stock market is still in a clear downtrend with a downtrending 50 day moving average ready to act as clear resistance for the overall market. If the volume continues to be light on the rallies and heavy on the selling, there is a chance Altisource Portfolio Solutions S.A. can succumb to the selling of the overall market as 3 out of 4 stocks follow the general market trend. If that happens, my cut loss will be a close below the 50 day moving average because the chart is being accumulated and breaking out strongly enough that that key support line should not be violated before this stock produces meaningful gains.

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Disclosure: No position