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Cognizant Technology Solutions Corporation A (CTSH) above a buy point

Cognizant Technology Solutions Corporation A (CTSH) an Indian IT services company seems to be on its move. It showed up on my screener list as well as in IBD 100 list creating new highs and broke up from a flat base recently. It is a large growth (16 billion) stock and it seems to have a momentum for further growth.

I checked how the stock is trending:

CTSH

A one year chart shows that the stock is in a very strong uptrend which is positive. The stock is a trending stock. The 3 year chart confirms that trend. We can see a choppy downturn during recession period, but that can be ignored as it will be seen on 5 year trend:

CTSH

Five year trend shows that the stock has been trending prior the downturn and it resumed the trend when the overall trend of the market returned north.

CTSH

So the stock is a trending stock. Let’s take a look at fundamental evaluation:

	2009	2008	2007
Revenue	$3,278(m)	$2,816(m)	$2,135(m)	Pass

	2009	2008	2007
EPS	1.78	1.44	1.15	Pass

	2009	2008	2007
ROE	20%	22%	24%	Fail

Analyst recommendation:

strong buy

Pass

	12/09	09/09	06/09	03/09
EPS Surprise	+2.40%	+9.76%	+25.67%	+1.88%	Pass

	2014	2013	2012	2011	2010
EPS Forecast	3.26	2.85	2.76	2.31	2.07	Pass

EPS Growth Rate (next 5 years)

20.0%

Pass

PEG

1.21

Fail

EPS / Industry (TTM)

16.16%

48.7%

Fail

Short Interest

1.7 days

Pass

Insider Form 4

-181,986

Fail

Weighted Alpha

+118.70

Pass

So far the stock has received 8 point out of 12 available. That means that the stock DIDN’T PASS through my fundamental evaluation, so I am not continuing in further evaluations. Originally I was thinking to be lenient on PEG, which seems to be quite low, but such a large negative insider activity prevents me from further evaluating of the stock or being lenient in regards loosing some rules.

The next stock I wish to look at is Atheros Communications (ATHR)

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Posted by MartZee April 20, 2010
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stocks MED buy stocks Medifast make money in stocks stock stock price liquidation value stock analysis fundamental criteria cup with handle pattern chart stock performance EDGAR MED price stock pick

Medifast (MED) shows great results and trading setup.

Next stock which showed in my trading screener list is Medifast (MED). I added it to my watch list and performed my analysis and it passed my screener, trending and fundamental criteria.

As for the trending, the stock started its move up basically two years ago, in June 2009 and since then it ran up almost to $40 per share. I made quite a good money riding this stock. However during January 2010 correction the stock pulled back with, as IBD says, “absurdly deep cup” and it is running back up.

The company shows excellent performance and I wonder what power slashed this stock so deep because fundamentally there was no reason for it.

See the daily chart:

MED

From the three year chart it is obvious that the stock broke from its base and since then it has been trending up:

MED

I ran my fundamental check with the following results (data are retrieved from EDGAR unless noted otherwise):

	2009	2008	2007
Revenue	$45,005(t)	$27,281(t)	$21,845(t)	pass

Because the last quarter data weren’t complete, I was comparing the last known quarters. But even with incomplete last quarter the company is already beating revenue of the previous years easily.

	2009	2008	2007
EPS	0.23	0.11	0.07	pass

	2008	2007	2006
ROE	14%	12%	18%	pass

Available data weren’t complete, so I was comparing older numbers and reviewed other sources for 2009 & 2010. The most actual number I could get for ROE was 28.22%, while industry is only 7.89%. With that in mind I am assigning a “pass” mark to this criterion.

Analyst recommendation:

strong buy

pass

	12/09	09/09	06/09	03/09
EPS Surprise	+41.67%	+11.11	+21.05%	+10.53%	pass

The company consistently beat EPS forecast last year and it is expected to do so this year. The 1st Quarter earnings is supposed to be released on May 5th.

	2012	2011	2010
EPS Forecast	1.76	1.55	1.17	pass

EPS Growth Rate (next 5 years)

25%

pass

source: Yahoo.com

PEG

1.45

failed

source: TD Ameritrade

EPS / Industry (TTM)

137.70%

100.79%

pass

source: TD Ameritrade

Short Interest

3.4 days

failed

Insider Form 4

+7,660

pass

Insiders are buying !! Total trades in last 3 months was 13 and in last year 34 with positive number.

Weighted Alpha

+337.4

pass

Another great number indicating strong price move over the years.

The stock received 10 points out of 12 available which makes it a very strong candidate to buy.

However, there are two reasons, why I am not going to buy right now. The stock seems to be forming a cup with handle pattern right now:

MED

It would pay to wait what the price will be doing in a couple of weeks prior buying. Also when I checked a weekly chart, it also shows a possible overbought reversal, so the price may actually drop. The earnings expectation until May 5th may sink the price and create a handle of the cup. If the earnings will be positive and better than expected, that may be the break out.

The second reason is that when I was calculating my risk I wasn’t able to meet my buying criteria. With the price of the stock at $29.89, ATR Value at 1.25 and total risk per the entire portfolio at 2% I could buy only 22 shares. That would still account to $657.58 trade size which is below my required $800 minimum limit and still my total capital exposure will rise to 10.66% which is a way too lot above 6% limit.
Since my total portfolio liquidation value to existing stops will be at $2,013.69 (above $2,000 limit) and this stock shows really strong momentum, it is #2 on IBD 100 list, etc, I may consider a variance for the rules and accept higher risk for this trade. But I really have to think about it.

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Posted by MartZee April 18, 2010
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money stock picks EPS DV DeVry position sizing ANSS BIOS CTSH aggressive stock aggressive trading finance stock evaluating

Ansys (ANSS) evaluation

In my previous post I tried to describe how I evaluate stocks which I am going to buy. First I was looking at Stryker Corporation (SYK), but further evaluation disappointed me so I decided not to buy yet. The next stock I liked was Ansys (ANSS). My first criteria is that the stock must be in my screener list, then I look at the chart to see if the stock is trending. I look at 1 year chart, 3 year (or 2 year) chart and then to 5 year chart. If on both charts you can identify strong uptrends I then continue with evaluation or drop the stock and do not bother anymore. Ansys passed all these first screening criteria and now is time to take a look at fundamentals.

I want to buy an aggressive fundamentally strong companies which have great potential for doubling or tripling their value. However these stocks are naturally more volatile and sort of dangerous to trade. So a good money management with defined stop protection is crucial. To eliminate stocks which are just a pure pump & dump stocks I want to be sure that such a company is making money; that I am not looking at any sort of phantom stock with virtual value. The only way how I can be sure is to look at some fundamental numbers. I look at 14 financial ratios and key number and try to decide whether it is good or what I am looking for or not. It is not an easy job and I am not an expert in it, but at least I try and make sure I did all I could.

Also all those fundamentals I am reviewing do not guarantee that the stock will perform well or even exceeds all my expectations. But at least I know that the stock has a high probability to grow and I am more confident holding the stock during corrections.

First I take a look at 12 criteria to see whether to continue with others or not.
The very first ratio I look at is revenue. I think, there is no need to explain this. If the company is not making money, I do not bother buying it. I want to see the revenue growing every year, so I take a look at last three known years (if the last year is not known yet I compare last three known quarters):

	2009	2008	2007
Revenue	$516,885(t)	$478,339(t)	$385,340(t)	pass

The stock passed. Every year the company increased its revenue.

Next I check its EPS. I want to see grow in every year:

	2009	2008	2007
EPS	1.27	1.29	1.02	fail

EPS in 2009 was lower than in 2008, the stock didn’t pass.

Here are the next criteria I typically look at:

	2009	2008	2007
ROE	9%	9%	13%	fail

Analyst recommendation = should be buy or better. This stock fails. You may say that opinion of analysts may be irrelevant and they may be wrong. That’s true and they may be wrong, but 12 independent analyst ca create some consensus and today’s Wall Street is obsessed with analysts and every a bit piece of bad or good news may trigger a large move of the stock. I do not want to go against the crowd. I want the crowd to ride my profit.

Next number I look at is EPS surprise which has to be positive in every reported period. That means that the stock had to exceed analyst expectations. Those number are what provide fuel to the further growth of the stock. Ansys passes this criteria:

	Quarter End	Surprise %
	Dec 2009	8.38
	Sep 2009	8.96
	Jun 2009	18.78
	Mar 2009	2.49

Next number I want to see is the EPS forecast and it should be positive and higher every following year. This company meets such criteria.

Then I check what is the EPS long term growth. It should be more than 10%. This company indicates 20%, so it exceeds my criteria twice.

Then I want to see how expensive the stock is, what premium I will pay by buying this stock. I check its PEG and it should be at 1 or less. This company doesn’t meet this criteria. It’s number at 1.87 exceeds my criteria. The expected 5 year trailing PEG is 1.27, so I assign “fail” to this criteria.

Next I check EPS growth of the stock with industry. The stock has a ratio 7.68% while the industry 16.04%, so the stock is not a leader in the industry.

Next criteria I look at is short interest. I want to know how long it would take to cover all short positions (assuming that I will trade the stock long). I want the coverage to be at 2 days or less. This number basically tells me how confident bulls are vs bears. The higher the number the more bears are selling the stock and it will most likely be falling in price. This stock has more than 5 days to cover, so it fails.

Next number I check is what insiders are doing. From the Form 4 I can see selling. Sometimes it doesn’t have to be as negative as it looks, but with this stock it may be a warning. This stock fails.

The last number I look at is Weighted Alpha. That tells me whether the stock price has growing or falling tendency over the time based on its current price and its movement. Ansys passes this criteria.

Overall this stock received 5 points out of 12 possible. That means I do not have to bother with further review because I am not satisfied with such results and I am not buying this stock.
If the stock ranked high (such as DeVry (DV) did recently) I would then calculate my risk, gain expectation, position size and look at the chart again to identify my entry point. But since I am not satisfied with the results of this stock I am not going to waste my time by reviewing it more.

The next stocks which were in my list and which I will review using the same approach are:

BIOS, PLCE, & CTSH (I will follow with this last one first, since it ranked really high). But I will write about it more later.
Happy trading.

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Picks 04/12 – 04/16

Trading Account:

New [tag]stock picks[/tag] this week:

Stocks bought or added to portfolio this week:
none

Stocks dropped from portfolio this week:
none

Stocks watched this week:

Ansys, Inc. (ANSS) Long
Stryker Corp. (SYK) Long

Existing & new [tag]holdings[/tag]:

Symbol	Qty	Last	Gain($)	Gain(%)	Stop	ATR	Risk to stop (%)
[tag]DV[/tag]	12	70.86	42.84	5.31	64.94	1.4800	-3.49
[tag]V[/tag]	10	93.50	93.50	11.07	87.93	1.4800	4.06

Contribution this week: $0

Current [tag]capital exposure[/tag]: -5.78%

New positions available to open: 2

Starting [tag]account value[/tag] = $2,168.60

Account value = $2,253.91 (without margin)

Buying power = $5,732.33

[tag]Portfolio Gain/loss[/tag] this week = 3.93%

[tag]Portfolio[/tag] Gain/Loss for APRIL 2010 = 3.96%

Portfolio Gain/loss for 2010 = -14.36%

[tag]Annual Return[/tag] (CAGR): -22.00%

The stock market retreated at the end of the week and some commentators say we are ready for a correction. We have experienced a short decline in January this year and since then the market has rallied almost without any interruption, so maybe the following week we may see some pullback to 50 day MA. Who knows, we will see at the beginning of the next week.

Nevertheless I am still watching my two potential candidates Ansys, Inc (ANSS) and Stryker Corporation (SYK). Stryker is now in about a month long consolidation and may break up to new 52 week highs. The volume is slightly higher than average and the stock still offers a promising gain. I didn’t have time to evaluate Ansys yet but it shows great results to me so far. I’ll see this Sunday.

My existing holdings were doing well particularly DeVry (DV) increased in price driven by institutional buying, improving rating, increased income statements, increased students’ enrollment in 2Q 2010 and good looking outlook for upcoming quarters. The stock recently gapped up and now may retreat trying to close the gap or it may hold it’s current level as traders feel confident about this stock and believe it will hold. Nevertheless if the stock pulls back it will offer another opportunity to buy this stock. As log as the US unemployment rate will be as high as it is now this stock may perform well.

Visa (V) is a great stock and it may rise up to $180 price level over the time. It will greatly benefit on improving economy when people start buying more and more using their plastic and it won’t matter whether it will be a credit card or a debit one. Recently the company benefited with debit cards very well. However the stock is quite volatile partially because of misconceptions I could see among investors considering this company losing money because of high defaults. This company is not involved in lending and this risk keeps it intact. The greatest risk is in economy performance rather than credit crunch itself as we could see people shifting their card usage from credit to debit. With both types of cards Visa is making the same amount of cash. High fluctuation however presents investors with great opportunity to buy this stock or be adding to their positions.

However, since both stocks are considered as aggressive growth stocks with high uncertainty I am watching them closely and try moving my stop loss carefully not to get kicked out too early, but not to increase a potential loss (or reduce profits) by holding too long. So stop management is crucial here. I moved my stop loss orders higher today.

Lending Club:

Debt notes

Available cash:	$0.00
In Funding Notes:	$0.00
Outstanding Principal:	$300.00
Accrued Interest:	$2.16
Account Total:	$302.16
Contributions this week:	$0.00
Weighted Average Rate:	11.71%
Expected Monthly Payments:	$9.86
Payments to Date:	$0.00
Principal Payments:	$0.00
Interest Payments:	$0.00
Late Fees Received:	$0.00

ROTH IRA Account:

New [tag]stock picks[/tag] this week:

none

Existing & new [tag]holdings[/tag]:

NTF Mutual Funds

Symbol	Qty	Last	Gain($)	Gain(%)	Div. Y(%)	Port. (%)
AIGYX	83.472	13.57	132.72	13.27	7.89	32
ATIPX	106.395	9.14	32.27	3.43	7.28	27
HISIX	26.918	7.31	-3.23	-1.62	4.56	5
SICNX	47.855	7.52	9.87	2.82	4.97	10
SWDSX	49.045	12.45	56.44	10.18	4.00	17
SWLSX	29.814	10.45	42.63	15.85	1.63	9

Individual ETFs

Symbol	Qty	Last	Gain($)	Gain(%)	Div. Y(%)	Portfolio (%)
AOD	219.0	9.23	17.52	0.87	15.50	85
IGD	29.0	12.77	13.63	3.82	11.60	15

Individual stocks

Symbol

Qty

Last

Gain($)

Gain(%)

Div.
Y(%)

Portfolio
(%)

Account target and current allocation

Individual stocks	0	42%	0%
NTF Mutual funds	3,583.97	38%	57%
ETFs	2,391.70	20%	38%

Contribution this week: $0

Starting [tag]account value[/tag] = $6,300.38

Account value = $6,276.84

Dividends received in April 2010 = $3.63

Dividends received in 2010 = $80.44

Portfolio dividends yield 2010 = 1.28%

Portfolio dividends yield lifetime = 2.62%

Dividends received lifetime = $164.56

[tag]Portfolio Gain/loss[/tag] this week = -0.37%

[tag]Portfolio[/tag] Gain/Loss for APRIL 2010 = 0.99%

Portfolio Gain/loss for 2010 = 4.78%

[tag]Annual Return[/tag] (CAGR): -2.29%

[tag]Portfolio Return[/tag] since inception: -7.35%

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Stryker (SYK) didn’t pass, will Ansys (ANSS) replace it?

Last night I ran my fundamental and technical check of Stryker Corporation (SYK) to see how it fits into my other requirements as a potential buy candidate. The previous day this stock showed up in my screener list as a strong candidate. Stryker as a medical equipment manufacturer expert in orthopedic products field showed great valuation at first. Its fair value at @70 a share indicates that this company is traded at a great discount with a buy price at 50.40 dollars and a target price at $100. The profit expectation could reach $50 a share and with buying 17 shares the profit expectation could reach 84% while risking only 6%. However my further screening criteria weren’t passed by this stock. Out of the total 14 points I assign to each screened fundamental ratio only 5 were passed.

That means that I am not rushing in buying this stock. I will keep it in my watch list instead and see what this stock will do and how it improves. I want to buy the best of the best of the best and because this stock didn’t pass my fundamental check I will stay on the conservative side of the trading or stock picking.

I then pre-checked another stock for further review. It is Ansys Inc. (ANSS). Ansys, based in Canonsburg, Pa., develops software solutions for design analysis and optimization. Using the company’s products, engineers can construct computer models of structures or processes to simulate performance conditions and physical responses to varying levels of stress, pressure, temperature, and velocity. Companies adopt Ansys software to accelerate a product’s time to market, reduce production costs, and optimize product safety.

This stock also popped up in my screen result list as a strong buy candidate. I checked its trending, one of my first pre-screen criteria if it makes any sense to continue in further screening at all.

So first I check 1-year chart to see what the stock is doing:

ANSS

From this chart, the stock shows strong uptrend, however the volume is a bit weaker than at the beginning of the trend. Then I take a look at 3-year trend, to see how the stock was trending in longer time frame:

ANSS

Even from this chart it is apparent that the stock is a great trend mover. I can ignore the recession period, since this was a global downturn and many even good stocks were driven down by the market. The most important factor here is that the stock was able to recover and resume the trend.

To make sure I am looking at this issue correctly I also want to check 5-year chart:

ANSS

A brisk look at this chart confirms that the stock is trending with some volatility and there fore providing a great opportunity to grow aggressively and make some money here. I can consider this stock as aggressive growth stock (with higher risk of course, which fits my strategy of this trading account and it makes this stock a good candidate for me). The only check which this stock didn’t pass is my requirement of making new 52-W high price, but this stock seems to have the strength to move there and meet the criteria and I am not buying yet. Another issue is low volume and actually drying volume, which signals that no new money are flowing into this stock. If I decide to buy an initial position I may consider a tight stop loss in case the trend will end.

So the stock passed my first screening, in general it passed my technical pre-screening and now I want to review its fundamental data. My goal is to buy fundamentally strong stocks, which have momentum for aggressive growth.

For fundamental check I use a set of numbers and ratios I want to check and for each passed ratio I assign a point. The highest points the better. Most likely I review 14 key ratios and I want at least 10 points to consider the stock passed. If it does, I buy this stock. If it doesn’t I may keep it in my list for future review or drop it and move on.

Since the stock is now declining in price I am not in rush and I will review fundamentals tomorrow.

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Posted by MartZee April 13, 2010
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money SYK DV DeVry Stryker Corporation gain stock stock price

DeVry (DV) regains its strength

DeVry (DV) gapped up today on the positive news. It is confirming its volatile attitude and strong growth type of stock. The strong uptrend remains intact driven up by institutional money and positive outlook of educational stocks although with some caution and good stop management in place. Today all educational companies rose after improved rating from analysts. First Oppenheimer changed its target price up to $75 per share and today Credit Suisse AG increased their rating to outperform and raised the target price to $75 too.

DeVry

If you are thinking of buying this stock, I would however wait for couple of days for the next development. The stock is now hyped up and tomorrow it may tend to go to close the gap and may fall down. I would like to see a confirmation of this break out. I would place a buy order a few ticks above today’s price high and lower it every day with the stock. if it continues falling and close the gap on high volume I wouldn’t buy, but if it turns back up, the stock should pick you up on its way up and provide you with some lift. Well, this is at least what I would do here.

DeVry

I am still watching Stryker Corporation (SYK) and as of today, it is down about 1%. I am planning on using similar strategy as what I said above in regards to DV. I will be trailing the buy order down with the stock price as long as the buy set up continues. The fair value of the stock seems to be at $72 a share so the stock has a potential for growth.

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Posted by MartZee April 13, 2010
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trading risk calculation SYK Stryker DV DeVry position sizing risk risk per trade risk exposure risk management risk control

Stryker Corporation (SYK)

Stryker Corporation (SYK) is once again on my buy list with a target price at $70 per share. I reviewed the trend of the stock and the only thing which I do not like so far is that the stock was growing in price on drying volume.

SYK

So I decided to watch this stock for couple of days to see where the stock will go next. I also run my position sizing and risk control calculation with the following results:

With the buy price at $58.00 per share, total risk per the portfolio at 2% I can buy 37 shares. However that would increase my total exposure to the entire portfolio to 8.64% per this trade and this is what I am not willing to accept. So if I buy 17 shares only, my trade size still will be above $800 per trade and my total risk per trade will be less than 6% (5.95% to be exact) and this meets all my criteria for opening a new position. I will risk roughly $50 on this trade only and that is acceptable for me.

I am not buying yet, just adding this stock to my watch list to see what the next movement will look like. I would like to avoid a similar mistake I did with DeVry (DV) where I overlooked the price – volume behavior of the stock and had to be watching the stock falling down just right after I bought it.

When speaking about DeVry, I am still quite confident about this stock, since it still presents strong fundamental values, it broke up through 2-year resistance, so this pullback may actually be a great opportunity to either buy or add DeVry to your portfolio.

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