Earnings Begets Relative Price Strength - Vol 2(2), Atkore International Group Inc.

Sep. 20, 2019 12:42 AM ETAtkore Inc. (ATKR)
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Contributor Since 2014

Employed in investment management since 1997.

Summary

  • Recapping the purchase decision.
  • Reasons for sale.

A little over one year ago, Atkore International Group Inc. (ATKR) met the criteria for purchase based on the relative strength metric. To recap, the initial relative return level was reached on August 7, 2018 following management's third quarter earnings release. In early September 2018, the stock price pulled back to an actionable level with the initial target price set at 30.25.

Today (originally submitted for publication on September 11, 2019), the stock price breached the target level. As described in an earlier post, there are two definitive sell rules. Both are based on an extreme relative return, 50% or 100% greater than the comparable index return. In other price/return scenarios, evaluation is necessary. One of those scenarios is when the target price is reached.

While ownership of ATKR has been profitable both absolutely (20% return) and relatively (16% greater than the equal-weight S&P 500 price return), the position was eliminated today for two reasons. After the purchase, the stock traded (down) more with the market in last year's fourth quarter than expected. And while the most recent earnings report pushed the stock nearer to the target price, it was the recent small-cap rally that pushed the price over the top. Again, trading more with the market than on any company specific news.

Thanks for reading.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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