Referencing the weekly homework and stock radar, I am highlighting a few of the charts below for potential trades in undervalued stocks.
As expected, The “Greece is saved” theme continued yet again. Stocks bounced back on Monday as Greece finally approved austerity plans late Sunday. The next test for the plan is a vote on Wednesday from the European finance ministers. They will vote to approve the bill.
I’d be interested in the statistical data for how many times our markets have run-up from similar type news over the past year. Wednesday’s vote from the European finance ministers to approve the bill creates another catalyst. This means we could see yet another “Greece is saved” move up in the markets, so be prepared.
The concerning part for the bulls is that today was reported as the lowest volume day in a decade for a non-holiday. It is hard to create favorable risk-reward trades in such a light volume environment. As traders, we must learn to adapt to this new environment. The goal is to actively keep risk minimal while still allowing for upside gains to be had.
Tuesday morning we have Retail Sales data coming out. These numbers are likely to set the tone early for the day. Strong data would give more confidence to the bulls that we are truly on the path of a strengthening economic recovery. With the way the market has worked lately, weak data may be shrugged off in just half a trading day.
Either way, I’m looking for Tuesday to have some weakness at some point prior to the vote on Wednesday. This may be a good time to start deploying some of the higher levels of cash I’ve been holding, noted in my StockTalk Trade Updates. As always, I’ll wait to see the action and move quickly rather than make a prediction.
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Kodiak Oil (KOG)
Yahoo Finance Profile:
Kodiak Oil & Gas Corp. engages in the acquisition, exploration, exploitation, development, and production of natural gas and crude oil in the United States. The company’s oil and natural gas reserves and operations are primarily concentrated in the Williston Basin of North Dakota and Montana, and the Green River Basin of Wyoming and Colorado. As of December 31, 2010, it had estimated proved reserves of 10.0 million barrels of oil and 9.0 billion cubic feet of natural gas. The company was formerly known as Columbia Copper Company Ltd. and changed its name to Kodiak Oil & Gas Corp. in September 2001. Kodiak Oil & Gas Corp. was incorporated in 1972 and is headquartered in Denver, Colorado.
Notes On Yahoo Finance Fundamentals:
KOG has a low forward P/E of only 9. Debt is listed at $55 million while cash is listed at about $79 million, showing no serious concerns in the short-term. The five-year PEG ratio is listed at only .85 with estimates of about 600% EPS growth for the year, to be finalized at the upcoming earnings release on February 28th. As of January 31, 19% of the float is short. At current volumes, that is only a 3 day short ratio though. Of the 17 analysts, the median price target is $11.26 with a high of $13. We should see some increasing bullish optimism into earnings, to which my style of trading would have me exiting the trade before the release.
Annotated Chart and Trade Details:
Boyd Gaming (BYD)
Yahoo Finance Profile:
Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company in the United States. As of December 31, 2009, the company owned and operated 15 casino entertainment facilities located in Nevada, Mississippi, Illinois, Louisiana, Indiana, and New Jersey. It owned approximately 812,500 square feet of casino space, containing approximately 21,400 slot machines, 425 table games, and 7,550 hotel rooms. The company also owns and operates a pari-mutuel jai-alai facility located in Dania Beach, Florida, as well as engages in travel agency business. In addition, Boyd Gaming Corporation holds a 50% interest in a limited liability company that operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey. The company was founded in 1988 and is headquartered in Las Vegas, Nevada.
Notes On Yahoo Finance Fundamentals:
BYD is a bit more speculative and most of the current price is based on future expectations. EPS expectations for next year are estimated to show growth of nearly 800%. It will need it as currently they are listing about $187 million in cash and a whopping $3.39 billion in debt, mostly long-term though via the balance sheet. The book-value-per-share is $13.91 which is above the current stock price. Some bulls will use that to justify higher stock prices. As of January 31, 21% of the float is short which is a 7 day short ratio at current volume levels. This makes BYD a large short-squeeze candidate if the bulls can gain further ground forcing them to cover. Time is against us on this trade if you do not hold into earnings, as they are expected to be released on February 21st. The analysts have a substantial disagreement on the proper valuation with the median target of 14 analysts at $7.25, but a high price of $11.
Annotated Chart and Trade Details:
Celldex Therapeutics (CLDX)
Yahoo Finance Profile:
Celldex Therapeutics, Inc., a biopharmaceutical company, engages in the development, manufacture, and commercialization of novel therapeutics for human health care. The company offers Rotarix for the treatment of rotavirus infection. Its clinical development programs include CDX-110 (rindopepimut), which is in Phase IIb clinical trial for the treatment of glioblastoma multiforme; CDX-011 (glembatumumab vedotin) that is in Phase IIb clinical trial to treat metastatic breast cancer and melanoma; CDX-1307, a Phase II clinical trial product for treating muscle-invasive bladder cancer; and CDX-1401, which is in Phase I/II clinical trials for the treatment of multiple solid tumors. The company’s preclinical product candidates comprise CDX-301 for treating cancer, and autoimmune diseases and transplants; CDX-1127 for immuno-modulation and multiple tumors; CDX-014 to treat renal and ovarian cancer; and CDX-1135, a complement inhibitor that suppresses inflammatory reactions. It has research collaboration and licensing agreements with Medarex, Inc.; Alteris Therapeutics, Inc.; 3M Company; Amgen Inc.; Amgen Fremont; and Seattle Genetics, Inc., as well as partnership agreements with GlaxoSmithKline plc; Pfizer Inc.; Vaccine Technologies, Inc.; and TopoTarget A/S. Celldex Therapeutics, Inc. was founded in 1983 and is headquartered in Needham, Massachusetts.
Notes On Yahoo Finance Fundamentals:
CLDX is another speculative trade based on future expectations. Unlike BYD, CLDX has ample cash of $62 million with only $15 million in debt. As of January 31, 12% of the float is short with a short ratio of about 7. This provides fuel for upside momentum if the bulls can further press the shorts and keep them on the defense. Phase II data is expected in Spring and unconfirmed earnings are expected to be released on March 5th, providing plenty of time for this trade to develop further. Of the 7 analysts, the median price target is $6, with a high target of $14. This is another stock with a wide range of valuations from analysts.
Annotated Chart and Trade Details:
As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long BYD and may initiate positions within the other mentioned stocks within 72 hours. Positions may change at any time.
