Blog : Sample Redacted Stock Pick

by Peter Leeds on May 11th, 2016

Sample Redacted Penny Stock Pick
 
Many of you (Express Alert Subscribers) have asked us, "what's the difference between the "Express" and the "Peter Leeds Stock Picks" alerts?"

Well, here is a redacted snippet of what we send out to Stock Picks subscribers.  Information reserved for paying subscribers was over-written by "=====."

Coming this week:  

• Updates on Previous Picks (SYNC... and more)
• State of the Market
• Peter's Personal Trades

NOTE:  Our selection SYNC has tripled in the last few days.  This will be one of the stocks we update you on later this week.  SYNC is currently in a full review, along with a few others.

Please View Our Brand New Video:  We hope to teach you our complete Leeds Analysis process.  If you want to see more episodes, please give it a view and a like...

Mandatory:  

With All Penny Stock Trades, use Loss-Limits.  Also use "Limit Orders."
 

New Penny Stock Pick:  

======
NASDAQ
All Prices at Time of Original Profile (May 11, 2016)
Trading Price:  =====
Buy Opinion:  $3.40 - $3.60
Short Term Sell Opinion:  $4.70 - $4.99
Long Term Sell Opinion:  $6.20 - $6.90

===== is a technology company, which specializes in what they refer to as, "=====."  Really, they just set up very advanced =====.  While the latter does not sound as flashy, it makes for a great and profitable business, especially when the fundamentals and technicals are screaming, "buy!"

In fact, ===== is the perfect combination of fundamental strength and technical analysis (TA) optimism.  On May =====, they released their Q1 results, which showed growth in all the right areas.  Meanwhile, in trading yesterday, the shares burst out of their long downtrend (from ===== in September to ===== three days ago), and did so in quite dramatic fashion.

===== shares popped up as much as ==% on Tuesday.  Even more striking is the sudden surge in trading volume over the last 6 trading days, which has been as much as 6 times greater than we've seen in the last month, and significantly higher than we've witnessed over the last 12 months.

Shares of ===== were heavily oversold (which Peter explains here), but have started to normalize with the buying pressure over the last few days.  From further into the "surface level" technical analysis side, the 21 and 42 day smooth moving average lines are just about to cross (almost certainly today, if not tomorrow morning).  

This is much more simple than it probably sounds to a newer investor, but just know that when the 21 day MA crosses the 42 day, it indicates a buying opportunity, and that the shares have started reversing higher.

There are two criteria in TA which are important, and imply that any patterns or indicators on the trading chart will be reliable.  The first is that only moves on heavy-enough trading activity can be trusted, and with the recent surge in volume ===== makes the grade.

The second is that almost all TA indicators identify the changing of a trend - downward slide becomes an upward move, or vice versa.  When a stock is trading flat, or is range-bound, no TA should be relied upon.  ===== again passes this test, as the TA indicators are appearing after a long downward trend, further implying the accuracy of what the indicators are suggesting.

From the operational perspective, ==== is one of those businesses which just keeps losing money, on a year to year or quarter to quarter basis.  However, their shares do not trade based on earnings.  

The real price drivers for a company like ===== are things like profit margins, total revenue growth, recurring customer transactions, and future bookings.  In terms of business model, ===== is more like an Amazon or SiriusXM, than a GM or Geico or Apple.  Simply put, you need to value and analyze ===== a bit differently than most more conventional companies.

However, we should still touch on some of their operating numbers.  ===== lost $===== million (M) last quarter, and $===== M last year.  Their recent balance sheet shows $===== M in assets, over $===== M in liabilities, which would have been a bit tight for our liking if not for their most-recent pivotal and encouraging financial results.  Peter explains how to read the balance sheet here.

As well, the years of operating losses are public knowledge, and as such have been factored into the share price.  In other words, you would not be able to buy shares of a company like ===== for anywhere under $5.60 if not for the manageable cash bleed (which goes back many years...).

Speaking of the financial statements, the annual sales have grown (from $===== M in 2011, to $===== M in 2015), although the rise has not always been steady.  Getting more granular, the last 5 quarterly results came in at $===== M, $===== M, $===== M, $===== M, until now, where the recent Q1 showed $===== M.

Given the measured (but somewhat reliable) growth trajectory, ===== shares would hold up pretty well even if nothing changed.  However, the stock will almost certainly rise on the momentum that their recent operational results revealed.  

The long term outlook for the stock in the view of management, and CEO =====, is very "=====."  Bookings grew by =====% (to $===== M) year-over-year (YoY), and the corporation is expecting ===== increases in ===== for the ===== of =====.

Gross profit margins in Q1 were =====%, which is quite solid for a ===== like =====.  (Gross profit margin of =====% means that for each dollar in revenue, ===== cents is profit... before research & development, unusual expenses, interest, taxes, yada yada...).  Gross profit for the trailing 12 months was $===== M, which represents double-digit YoY growth of =====%.

The entire ===== company is valued at about $===== M, based on the current share price.  Meanwhile, they are displaying $===== in revenue per share, which is not bad, but we'd like to see that number a little higher to support the $===== share price.

About =====% of the ===== M outstanding shares are owned or held by people with a close understanding of the company.  Insiders hold =====%, while institutions and professional investors are hanging on to another =====%.  

Speaking of the institutional shareholders, of the 3 most recent, their price targets range from $===== at lowest, to $===== at highest.  (However, these targets are not as fresh as we like typically for them to be fully reliable).  In any case, in this month, all 3 of those newest analysts rank ===== as a "buy."  

Since ===== is technically in the "=====" space, they face some pretty serious competitors.  Of course, ===== is a niche player which will be able to survive due to their specialization, even beneath the shadows of these massive corporations.

This also leaves ===== open to potential acquisition by the bigger companies, but that would be more for the ===== clients and employees, as opposed to a takeover for the intellectual property and/or technologies.

Overall, TA says the shares will climb in the short and medium term.  In addition, fundamental analysis points to higher prices in the long term.  In the words of CEO, =====, "=====."

Get alerts like this, plus Peter's Personal Trades, here.