Weekly Pops And Drops

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Includes: APLE, ERA, ERII, GBDC, PDLI
by: WMA, LLC
Summary

Tracking weekly changes in fundamental and price trend for 5,200 companies.

Momentum trades *with* fundamental backing.

We like 2 stocks to buy and 3 stocks to short this week.

In our weekly Pops & Drops publication, we feature companies with significant fundamental score improvements/deteriorations in our rankings, along with a positive/negative change in our weekly price trend indicator. At the end of each trading week we scan our 5,200 stock universe to find these potential movers. We highlight the pops to buy and the drops to sell. Prior weeks recommended Pops & Drops trades are tracked in the last section below.

In a down week for markets ending August 16, we only recorded 3 pops. There were 15 drops. We like two companies to get in on the long side and three companies to get short, as featured below.

Source: www.williamsmarketanalytics.com

Pops To Buy

Golub (NASDAQ:GBDC) is a closed-end management investment company which does not rely on net interest margin (NIM) to generate earning. Golub will therefore be less sensitive to falling interest rates. Golub enjoyed a big jump in consensus revenue outlook last week, in addition to an improvement in its Growth and PEG scores. Golub attains a Strong Buy rating as both a Growth stock and a Yield stock in our rankings.

Source: www.williamsmarketanalytics.com

Although the stock is not cheap, it remains mid-pack in terms of valuation among financials. The 7% dividend yield with a low Risk Score makes Golub a convincing buy for us.

While the weekly chart of Golub shows a big run-up since 2010, the stock has actually been consolidating gains (between $15.50 and $17.50) for the better part of two years. Recent price action may be seen as a break-out from this congestion zone to the upside. In a momentum market, buy what is rising. We’ll be buying Golub.

Source: www.eodhistoricaldata.com

Apple Hospitality REIT (NYSE:APLE) is a hospitality real estate investment trust, owning 234 hotels throughout 34 U.S. states. This is not a flashy stock, but it is low risk and has held pretty much in the $14.00 - $17.50 range since its existence. Apple just enjoyed a big improvement in its consensus EPS forecast and saw some analyst upgrades over the past week. This allowed Apple to buck the downtrend and rise +2.21% for the week. Don't expect much growth out of this REIT. However, the hefty 7.6% annual dividend, solid balance sheet (top 15% within Real Estate sector according to our rankings), and attractive valuation (18.8x P/E forecast for next year, putting APLE in the top 20% of REITS) makes this stock a safe bet in an increasingly volatility market.

Source: www.williamsmarketanalytics.com

The weekly chart reflects the low Risk Score of this stock. Dips have been shallow and bought quickly. This time should not be different. We also like the zero correlation with the U.S. Total Market Index, meaning good diversification benefits with this stock. In a yield-hungry world, Apple Hospitality pays the bill.

Source: www.eodhistoricaldata.com

Drops To Sell

Era Group Inc. (NYSE:ERA) operates helicopters to transport personnel to, from and between offshore oil and gas production platforms, drilling rigs and other installations. This is a cyclical company, sensitive to activity with the oil industry, with a stock beta of 1.21. Short interest in the stock is at 4.60% and picking up.

Era makes our Drops List for this past week due to a large downward revision in EPS and a significant fall in its Growth and PEG scores. With a 3-month EPS Revisions score at 28.7 and Revenue Revisions score at 33.9, Era is a sinking ship. Valuation is also in the bottom 10% within the Energy sector and there is no reason to buy ERA for yield as the company pays no dividend.

Source: www.williamsmarketanalytics.com

The weekly chart shows lower highs since the 2016 rally attempt. On the positive side, the stock did manage to bounce off its 2016 low earlier this year. Given the poor fundamental backdrop, we’d expect at least a re-test of lows at $7.00. If our analysis is wrong, we would cover shorts above $11.00.

Source: www.eodhistoricaldata.com

PDL BioPharma (NASDAQ:PDLI) acquires and manages a portfolio of companies, products, royalty agreements and debt facilities in the biotechnology, pharmaceutical and medical device industries. The stock fell -5.9% last week after reporting a Q2 loss of $0.04/share. Short interest is at 13.2% of shares outstanding, about the middle of the range over the past 5 years.

Fundamentals of PDL are ugly. We saw big downward revisions in EPS and Revenue Revisions last week. Our Revision scores for the company are the worst in the Healthcare sector. PDL’s Valuation score fell -44.9 points and its MV/EBITDA score fell -49.8 points. The fall in earnings is outpacing the fall in company value, so far.

Source: www.williamsmarketanalytics.com

The weekly chart shows price breaking down. A bit of caution on the short side, as Friday’s close posted a potentially bullish hammer. We can’t see PDL mounting a significant rebound, however, with this horrible earnings outlook. Expect a re-test of lows at $2.00/share. We’d exit shorts above the July swing high around $3.30, which would probably imply a change in PDL’s outlook.

Source: www.eodhistoricaldata.com

Energy Recovery (NASDAQ:ERII) is an industrial providing energy solutions, notably converting wasted pressure energy into a reusable asset. The stock fell -9.07% last week without much news. We do note that our Insider Composite fell -10.1 points, meaning company insiders sold shares last week, for whatever reason. Short interest is at 9.5%, well below the 19.8% short interest from June 2018.

Energy Recovery made our Drops List due to a deterioration in several fundamental scores – EPS and Revenue Revision, P/E score, Historical P/E Spread score, and MV/EBITDA score. Consensus annual growth forecasts, on the positive side, have not come down yet, even as EPS and sales estimates are getting revised down (hence our “Hold” on the Growth rating). In terms of valuation, Energy Recovery is among the most expensive of the 623 industrial companies that we track.

Source: www.williamsmarketanalytics.com

The stock’s uptrend from the Q4 low has been broken and, unlike the broad market, there was no interest in buying Energy Recovery last week. Downward EPS and sales revisions should keep the stock under pressure. We will target December lows just below $7.00. If the stock turns around, we’ll get out around $10.25.

Source: www.eodhistoricaldata.com

Prior Week's Pops & Drops Trades

Source: www.williamsmarketanalytics.com

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.