Winners And Losers Since Mid-June Buying Spree - Holding Period Is Not Over Yet

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Includes: AINV, AJRD, ATRO, BEAT, CNC, CRTO, ENZ, ERI, IDT, INBK, LFVN, LGND, LIND, MOH, NUE, PRPO, PRVB, SSSS, TOL, WCG
by: Magdalena Pacholska
Summary

Effects of merger news have waned and acquirers like Centene and Eldorado can be more attractive to buy.

Two stocks I covered on SA in June have earned positive returns.

Health care and industrial stocks affected by the Trump administration decisions and negotiations.

Thoughts about performance presentation

Due to a mix of personal, professional and technical reasons more than 3 weeks have passed since my last article "Do Not Sell In May (June) And Go Away; Look At These Buy Candidates" was published. There have been interesting developments both in the market as well as in news coverage of the proposed buys. None of the stocks was sold, but one was added.

I have dedicated some time to thinking about what would be the best long term way of presenting the performance and success rate of my stock picking which is based on the system I am still experimenting on. Should I choose time weighted return, or holding period return? Weekly? Monthly? Quarterly? For the start, I decided that I will present a raw performance as per stock for a couple of reasons. First, the number of stocks proposed by each of the strategies and moment of transaction may vary, so not always a sell will be matched with a buy. Second, rebalancing schedules and stock selection parameters vary among strategies. Therefore, I believe it will be more instructive to rather see a longer term performance per each strategy than to evaluate an amalgam of positions selected by screens which do not have many common denominators. This will allow to compare strategies for a possible diversification in times of volatility in the market. Third, not the least important, I would like to be open to your suggestions to see what really interests you as fellow investors.

What drives returns?

See below the recent (as of close on Friday 12 July) returns of each of the held stocks ordered from the highest to the lowest.

Ticker

Company

Return %

return since

IDT

IDT

29,88%

Jun 16, 2019

AJRD

Aerojet Rocketdyne Hldgs

11,45%

Jun 16, 2019

NUE

Nucor

5,90%

Jun 16, 2019

LFVN

Lifevantage

5,50%

Jun 16, 2019

PRPO

Precipio

4,87%

Jun 22, 2019

LGND

Ligand Pharmaceuticals

4,45%

Jun 16, 2019

INBK

First Internet Bancorp

2,21%

Jun 22, 2019

LIND

Lindblad Expeditions

1,25%

Jun 16, 2019

OTC:AINV

Apollo Investment

0,18%

Jun 16, 2019

PRVB

Provention Bio

0,00%

Jul 12, 2019

TOL

Toll Brothers

-1,95%

Jun 16, 2019

WCG

WellCare Health Plans

-3,02%

Jun 16, 2019

GSVC

GSV Capital

-3,58%

Jun 16, 2019

CRTO

Criteo

-4,80%

Jun 22, 2019

CNC

Centene

-6,10%

Jun 16, 2019

BEAT

BioTelemetry

-6,12%

Jun 21, 2019

ATRO

Astronics

-6,57%

Jun 16, 2019

ERI

Eldorado Resorts

-6,84%

Jun 16, 2019

ENZ

Enzo Biochem

-7,20%

Jun 23, 2019

MOH

Molina Healthcare

-7,20%

Jun 16, 2019

The system allows for an interesting analysis of stocks grouped by their fundamentals - e.g., beta or EPS growth. We can see what was a profile of the best performing stocks for this period (some starting from 16 June, others added along). Just as a benchmark, S&P 500 yielded 4.4% since 16 June 2019 to last 12 July. Five stocks selected on 16 June outperformed the market.

Sources: Equities Lab, Inc.

For example, a Micro Cap category achieved the best average result from all Market Cap groups. This group has only one stock, Precipio Inc. (PRPO), with the return of 4.87%. The worst performing cap group were Large Caps, containing 4 stocks: (CNC) Centene, (NUE) Nucor, (WCG) WellCare Health Plans and (MOH) Molina Healthcare, with average return of -2.61%.

Two stocks with the lowest Beta ((CRTO) Criteo and (AJRD) Aerojet Rocketdyne Holdings) achieved also the highest average return of all Beta groups: 6.35%. But the next best result belongs to the category of the highest Betas, those above 3, containing only one stock - again Precipio.

On the spectrum of EPS TTM growth, these were 5 stocks with medium growth (between 0 and 1%) that achieved the highest average return of 5.17%. These are: (GSVC) GSV Capital, (LFVN) Lifevantage, (IDT) IDT, (LIND) Lindblad Expeditions and (NYSE:ENZ) Enzo Biochem. On the other hand, seven stocks with highest growth rates disappointed with the lowest average return of -2%. Those exquisite temporary losers are: (LGND) Ligand Pharmaceuticals, (MOH) Molina Healthcare, (WCG) WellCare Health Plans, (NUE) Nucor, (TOL) Toll Brothers, (ATRO) Astronics, (CNC) Centene.

It seems also that choosing stocks by their Piotroski score can be helpful in achieving positive returns. From 5 groups dividing the stocks along the scale from 0 to 9, those were the ones with score-F between 6 and 8 ((ATRO) Astronics, (AJRD) Aerojet Rocketdyne Hldgs, (LIND) Lindblad Expeditions, (BEAT) BioTelemetry, (LFVN) Lifevantage, (IDT) IDT) that got the highest average of 5.89%, mostly pulled by IDT and Aerojet.

What happened to these stocks in the last 3-4 weeks?

Let's start from the best performing ones down to the worst ones and see what news popped that favoured or halted the demand. I am reviewing news headlines provided by Finviz.com for each stock.

IDT

On the June 18 Thomson StreetEvents published the transcript of the earnings conference call of IDT from June 5, where the CEO Samuel Jonas announced that the company continued to maintain gross profit and increased income from operations to $2.7 million from a loss from operations of $1.7 million in the year ago quarter. The investors apparently got encouraged after reading transcript and stock soared by 8.5%.

Aerojet Rocketdyne Holdings

I covered this company in a dedicated article (read here). The end of June was a very fortunate time for Aerojet, with news appearing nearly every day about new contracts won:

And the price of the stock kept climbing…

Nucor

Investors reacted positively to the reported earnings for the first quarter, which grew by 41.7% YoY to Q1 2018, exceeding expectations. Additionally, expansion and growth plans announced during their Investor Day by the CEO John Ferriola, fed the enthusiasm for a stock in the sector helped by Trump's foreign steel tariffs.

LifeVantage

The company I covered in a dedicated article (read here) was added on the 1st of July to the Russell 3000® Index. This allows to predict that LifeVantage stock price may benefit from consequent reshuffle in the respective ETFs when the managers will have to buy the stock to comply with the new composition of the index.

Precipio

The stock is sporting currently a modest return, but actually until the very beginnings of July this was the best performer with returns well in range of 40%, shooting from $3.06 on June 21 to $4.39 on July 1. Possibly the spur was strengthened by the announcement on June 25 of the initiation of a second development project with H3 Biomedicine that will include the creation of a targeted gene panel. Since then the stock dropped to $3.16.

Ligand Pharmaceuticals

Since I included it in the selection, Ligand has enjoyed three positive news announcements:

In the reference period Ligand's Stochastic RSI, RSI, MACD and MFI (indicators I observe for technical analysis) have been steadily growing.

First Internet Bancorp

Following the announcement on June 19 of the full exercise of underwriters' over-allotment option on the of the Company's 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029, the shares dropped slightly. However the last week of June saw a streak of positive volume and a slight recovery. They will report their Q2 earnings on July 24.

Lindblad Expeditions

The stock had a nice run since the beginning of the year, raising from $12 in beginning of February to nearly $19 in the beginning of July. The most recent news have related to their successful warrant exchange offer completed on the July 12. Technical indicators for the stock are showing an upward direction.

Apollo Investment

There haven't been many corporate news about Apollo Investments besides the schedule of earnings reporting and call for August 6. Buying the stock in mid-June would have not be the optimal choice according to the technicals, as the price was just bouncing downwards from the upper Bollinger band. Buying it around June 27 or 28, when my setup of 21-days' Stoch RSI dipped below 20, could have been a better choice if someone is interested in short term trading.

Provention Bio

The stock entered the screen just end of last week and in the system it has not recorded any return yet. However, on my broker's screen I can see that it grew by 6.7% from Friday July 12 to yesterday Monday July 15. Provention Bio is a clinical stage biopharmaceutical company, focuses on the development and commercialization of therapeutics and solutions to intercept and prevent immune-mediated diseases. It surged over 217% in the beginning of June on the announcement of public offering of common stock, which was subsequently cancelled the same week.

Toll Brothers

Since closing above $38 on June 14, the stock slid to level between $36-37 in last 2 weeks. There have been announcements of new plans in Gilbert, AZ, Horsham, PA, and in Atlanta Midtown. The company launched also on July 6 their National Sales Event through July 28. It can be expected that the stock will budge upon the news on the deals closed during the sales period.

WellCare Health Plans

On the June 24 the shareholders of WellCare Health Plans and Centene Corp. approved the $17.3 Billion planned merger (Centene acquiring WellCare), leaving the deal to now face federal and state regulators before it can be finalized. The stock dropped by some 6% in the following days but has already almost fully recovered. There have been news about positive recognition of WellCare Health Plans, Inc. for its community service. Glassdoor also included CEO Ken Burdick in the list of Top CEOs on the 92nd position.

GSV Capital

Not many news since mid-June, stock has been trading mostly flat. However, there are signs of growing institutional interest with upward heading MFI, MACD and Stoch RSI for 21 and 40 days.

Criteo

Criteo closed on June 21 at $18.4 and slumped to $16.6 by June 26. The news that accompanied this drop was the departure of the COO Mollie Spilman. Since then the stock has been slightly recovering and the technical indicators went up as well. What could have helped this advertising platform for the open internet might have been a wider awareness about the June 14 Forrester report titled "Now Tech: Omnichannel Media Management, Q2 2019", positive about the open internet solutions. Some positive news came up in July about partnership with Custora, a customer intelligence platform, and earning Certified Against Fraud, Inventory Quality Guidelines and Certified Against Piracy Seals from the Trustworthy Accountability Group (TAG).

Centene

The stock has been trading mostly flat in last 3 weeks, with a dip in the first week of July. There are signs of a recovery, though. Besides acquiring WellCare Health Plans, Centene increased their stake in Spanish health company Ribera Salud from 50 to 90%. Last week news came up that Trillium Community Health Plan Inc., a part of Centene, was awarded a 5-years' contract by the Oregon Health Authority. Bad news for customers, but probably good for Centene, broke on Thursday that the Trump administration decided to withdraw its proposal to eliminate rebates from government drug plans.

BioTelemetry

Not many significant news, neither big changes happened in last weeks. However, we can see a divergence of a dropping price and a rising MFI(14), which could suggest an upcoming change in price direction.

Astronics

The stock has been trading without any major moves in last 3 weeks. News were announced in the beginning of July that Astronics acquired 100% of the equity of Freedom Communication Technologies, Inc. (FCT) a developer and manufacturer of communication test equipment for the land-based mobile radio test market. Last week Friday July 12 was also a deadline for closing a deal of selling the Airfield Lighting product line to Hughey & Phillips, LLC.

Eldorado Resorts

The stock dropped sharply after announcement that the casino operator has agreed to buy rival Caesars Entertainment Corp for about $8.5 billion in cash and stock. Last week news popped up that Eldorado sells its two casinos Isle of Capri Casino Kansas City in Kansas City, Missouri and Lady Luck Casino Vicksburg in Vicksburg, Mississippi to Twin River Worldwide Holdings, Inc. (TRWH) for aggregate consideration of $230 million in cash.

Enzo Biochem

Following a significant drop of price in the last week on June, Enzo Biochem has been increasing since the beginning of July, showing positive movements in technical indicators. On July 11 the company announced several key transformative initiatives in its labs business unit designed to propel and accelerate growth.

Molina Healthcare

The stock experienced a slight drop without a specific reason. They announced their earnings release schedule for July 30.

Conclusions

I hope it was interesting for you to see that some of the stocks were able to earn a decent return even for such a short period. On the other hand, for companies that have very strong fundamentals that are showing negative returns for the time being, it might be worth waiting awhile until a technical signal indicates a better entry price.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.