The Market Bull

NGVC

2013-09-03T22:02:00.000-07:00

Natural Grocers by Vitamin Cottage, Inc. is a specialty retailer of natural and organic groceries and dietary supplements. The Company operates within the natural products retail industry. The Company offers products and brands, including a selection of natural and organic food, dietary supplements, body care products, pet care products and books. The Company offers its customers an average of approximately 18,000 store-keeping units (SKUs) of natural and organic products per store, including an average of approximately 7,000 SKU of dietary supplements. As of June 30, 2012, the Company operated 55 stores in 11 states, including Colorado, Idaho, Kansas, Missouri, Montana, Nebraska, New Mexico, Oklahoma, Texas, Utah and Wyoming, as well as a bulk food repackaging facility and distribution center in Colorado.

Expect a short squeeze to play out in the near-term.

Valuation Measures

Market Cap (intraday): 873.99M

Enterprise Value (Sep 4, 2013): 873.40M

Trailing P/E (ttm, intraday): 93.88

Forward P/E (fye Sep 30, 2014): 63.87

PEG Ratio (5 yr expected): 2.98

Price/Sales (ttm): 2.13

Price/Book (mrq): 10.59

Enterprise Value/Revenue (ttm): 2.15

Enterprise Value/EBITDA (ttm): 31.13

https://www.tradingview.com/v/5IF2tMGB

EXPR

2012-10-25T08:16:00.001-07:00

Express, Inc. (EXPR) is a clothing retailer that targets men and women between the ages of 20 and 30. The stock has fallen significantly in the past year, and it appears to be a great value play. The stock's chart has a very significant gap that I am betting on being partially or completely filled.

The following are some multiples on the stock that reflect its value:

Price/Earnings: 6.61

Price/Sales: 0.46

Price/Book: 3.27

PEG (Price to Earnings Growth): 0.38

How do these compare with peers? The following are the retail industry's averages for these multiples:

Price/Earnings: 20.44

Price/Sales: 1.73

Price/Book: 6.57

PEG (Price to Earnings Growth): 1.46

EXPR has a Current Ratio of 1.48, a Quick Ratio of 0.70, and an Interest Coverage of 6.54 (company's operating profits are 6.54 times greater than interest payments). Therefore, it should not have difficulty in repaying its debt.

https://www.tradingview.com/v/mCHHyqeM

EUR/USD

2012-07-31T19:19:00.003-07:00

Needless to say, Europe finds itself in a weak economic environment and with elevated/unsustainable levels of sovereign debt.

What solution is there to promote economic growth and diminish the debt burden? ... Printing money.

The ECB is likely to, at some point in the future, follow in the Fed's footsteps and inject liquidity into markets by increasing its balance sheet via large-scale asset purchases. A greater money supply should lead to more lending and more economic growth. More money should also, in theory, lead to inflation, thereby reducing the real value of outstanding debt.

So, if things continue exactly as they are now, the euro will weaken as investors consider the possibility/risk of disorderly defaults and of contagion. If, on the other hand, European policymakers "fix" the problem by printing money, the added supply of euros should further weaken the currency.

What reason is there to be bullish on the euro? Apparently none. Any rallies in the currency are probably due to short covering off news that, most likely, will not change the long-term outlook for Europe and its currency.

And, in my opinion, there isn't room for a contrarian argument to be made. Sure, a vast majority of investors are bearish on the euro, but such views are based on fundamental data which one cannot ignore.

https://www.tradingview.com/v/U7Jtx9oz

SPY

2012-07-31T03:03:00.002-07:00

Global risk assets have rallied over the past couple days off remarks by European Central Bank president Mario Draghi that the ECB is ready to enact any measures in order to preserve the euro. Investors have been speculating that the ECB will initiate a form of quantitative easing in Europe. The ECB would be buying European assets, such as Spanish/Italian sovereign bonds and corporate bonds of companies in financial distress, via the European Stability Mechanism (ESM). The ECB would be lending money to the ESM, which would use this "printed money" to buy assets and then use these assets as collateral in a repo with the ECB. In effect, the European Central Bank is printing money and pumping it into the system. Were this to in effect take place, one would expect global risk assets to further rally. Since the ECB would be "printing" euros, this "solution" to the European debt crisis would further weaken the euro over the long-term. With markets discounting that world central banks will be announcing new measures this week. The US Fed will be meeting this week (FOMC meeting today and tomorrow). The Bank of England (BoE) and the ECB are also to meet this week. While investors expect the ECB to announce their version of QE, many anticipate that the Fed will be moving the IOER (interest on excess reservers) to 0% from 0.25%, with the hope of "forcing" banks to lend out the excess liquidity they hold above their capital requirements. With investors having such expectations going into the meetings this week, markets have factored in the possibility of these new economic measures going into effect. Were policymakers to disappoint and no new measures announced, expect the markets to sell off sharply. With such macro uncertainty (European debt crisis, potential Chinese slowdown, and US fiscal cliff) it seems smart to take profits at these levels in the market and to have a cautious outlook. This risk underweight thesis would only be changed by new policy measures effectively being announced this week or in coming months. However, there is no reason to be very bullish at these levels and with the current economic context.

https://www.tradingview.com/v/Ikg34uY0

PG

2012-05-12T09:32:00.001-07:00

Pennant formation signaling future short-term continuation of downtrend.

P/E: 19.84
P/B: 2.65

https://www.tradingview.com/v/OKvNzJnx

SBUX

2012-05-11T22:31:00.005-07:00

Be on the lookout for a potential "bump and run reversal" in SBUX.

P/E: 31.80
P/B: 8.13

https://www.tradingview.com/v/h9Bq8ajS

Bullish on IBM

2012-05-07T08:54:00.004-07:00

Buying IBM on this pullback to the 50 DMA.

https://www.tradingview.com/v/vaZsC0d0

Bullish on GRPN

2012-04-23T13:07:00.003-07:00

GRPN is ready to bounce off of oversold levels. Shares went up 6.47% on heavy volume today. Expect it to approach the 14.50 level in the coming weeks. Good stock for a short-term trade.

https://www.tradingview.com/v/HuWAe8vZ

Bearish on YOKU

2012-04-20T11:23:00.001-07:00

Possible head and shoulders pattern to be forming in YOKU.

https://www.tradingview.com/v/dtwYIR0T

HGT

2012-03-16T12:14:00.000-07:00

Look for HGT to break through the 50-day MA. This trust, which pays a monthly dividend, could be poised to make a significant move up, especially considering the drastic underperformance of shares in the past few months.

https://www.tradingview.com/v/CcYO1MNP

AAPL

2012-02-29T16:26:00.000-08:00

Contrarian trade on AAPL.

https://www.tradingview.com/v/p5aAKgIk/

COP

2012-02-22T21:18:00.001-08:00

Short-term bearish on COP.

https://www.tradingview.com/v/MWLi4zMW/

SPY

2012-02-22T21:17:00.000-08:00

Expecting a short-term pullback in SPY.

https://www.tradingview.com/v/28iE43BK/

Bullish on GES

2012-01-28T18:04:00.000-08:00

Guess?, Inc. is a California-based company that designs, markets, distributes, and licenses casual apparel and other consumer products. Among its branded names are GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, and G by GUESS. The Company’s apparel is targeted for both men and women primarily in the ages between 18 and 32. GES operates in five segments: North American Retail, European Operations, Asia Operations, North American Wholesale, and Licensing Operations. The Company is part of the ICB’s Consumer Services industry and, within that, of the Apparel Retailers subsector.

GES, as of 1/27/12, is trading at 29.26. Its 52 week high was 48, reached on 2/22/2011, while its 52 week low was 25.99, made on 10/4/2011. With 92.777 million shares outstanding as of 12/1/2011, GES has a market cap of $2.71466 billion. The Company paid a .2 dividend on 12/12/2011, representing an annualized 2.73% yield at the current price.

Shares have underperformed the market and peers in the industry year-to-date. GES has fallen 1.88% YTD, while the S&P Index (SPX) has returned 4.95%, and its group of Bloomberg Peers has seen returns of 7.55%. GES shares fell 37.14% in 2011.

At the current price and with ttm EPS of 2.94, GES is trading at a P/E ratio of 9.97. The average P/E ratio for the Apparel Retailers subsector is 22.05, while the average P/E ratio for the group of Bloomberg Peers is 26.00. This suggests that GES is trading at a very significant discount to similar companies.

The past 5-year earnings growth rate for GES was 15.24%. Currently, the long-term growth rate for earnings is projected by Bloomberg to be at 14.67%. Using this value and the P/E ratio of 9.97, the resulting PEG is .68, and signals a severe undervaluation. However, Standard & Poor’s projects an 8% compound annual growth rate in the earnings for the following 3 years. The S&P projected 8% CAGR would result in a PEG of 1.25. The average PEG ratio for the Apparel Retailers subsector according to Bloomberg is .79, while for the group of peers according to Bloomberg the average PEG ratio is 1.51. GES is undervalued as it is trading at a PEG below one when using its long-term growth rate. Furthermore, it is also trading at a discount compared to its peers as these have greater PEG ratios. This demonstrates that the undervaluation which was claimed when analyzing the P/E ratios was not due simply to different earnings growth rates. Taking into consideration the growth of earnings, GES continues to be undervalued by investors.

GES is trading at a P/S ratio of 1.00, compared to 1.36 for the Apparel Retailers subsector and 1.38 for the Bloomberg Peers group. The P/B ratio for the Company is 2.22, compared to 6.02 for the Apparel Retailers subsector and 3.75 for the Bloomberg peers. The P/FCF is at 11.64, compared to 34.70 for the Apparel Retailers subsector and 34.42 for the Bloomberg Peers. These three ratios serve to further confirm GES’s relative undervaluation.

GES is a financially strong and safe company. It operates using very low levels of debt. Its total debt to total capital ratio is 1.07%, while the average of the Apparel Retailers subsector is 16.40% and that of the Bloomberg Peers is 21.73%. The fact that GES has such a small percentage of debt, both in absolute and relative terms, signals that it would be better able to endure through an economic recession or depression when compared with other companies with more elevated debt levels.

GES’s quick ratio using data from the most recent quarter is 1.89. Compared to the quick ratio of 1.14 for the Apparel Retailers subsector and 1.42 for the Bloomberg Peers, GES has greater short term liquidity and, therefore, is better able to meet any short-term obligations.

The following table demonstrates that GES is more effective than other similar companies, as it is able to obtain greater returns on its assets, on equity, and on its invested capital. All data is calculated using the most recent filing.

	ROA	ROE	ROIC
GES	15.05%	22.96%	25.16%
Apparel Retailers	12.90%	22.63%	20.27%
Bloomberg Peers	8.70%	16.94%	18.70%

The following table demonstrates that GES is relatively more profitable than related companies. Though its gross margins are smaller than those of the Apparel Retailers subsector and the Bloomberg Peers, the Company has greater operating and net profit margins. The margin values are calculated using data from the most recent year.

	Gross Margin	Operating Margin	Net Profit Margin
GES	43.83%	16.71%	11.64%
Apparel Retailers	45.06%	12.16%	8.52%
Bloomberg Peers	46.41%	10.45%	5.79%

The short interest on GES, as of 1/15/2012, was at 7.53% of float. This is equivalent to a short interest ratio of 3.39. The average SI ratio for the Apparel Retailers sector is 6.06, while the average for the Bloomberg Peers is 5.72. The fact that GES has relatively fewer short sellers demonstrates that investors are recognizing the fact that this company is trading at a significant discount, and that any move to the downside in share price is very limited and not as likely to occur.

A simple DCF valuation of GES’s earnings yields a higher value for GES shares than the current price of 29.26. A growth value was determined for GES earnings using the current ttm EPS of 2.94, the conservative S&P projected CAGR of 8% for the following 3 years, and a discount rate of 12%. These values result in a growth value of 8.2. A terminal growth rate of 3% was used in order to calculate the resulting terminal value of 30.17. Using the 8.2 from the growth value and the 30.17 from the terminal value, the fair value of GES shares according to the data used should be $38.37. This represents a 31.13% increase from the current price of $29.26. I consider this to be a conservative estimate. Using the Bloomberg long-term growth rate estimate of 14.67 for the following 5 years and a terminal growth rate of 4, while holding all other values the same, the fair value is calculated to be $58.78. This represents a 100.89% increase from the price of $29.26, and is slightly above GES’s all-time high of $57.20.

The projected growth rate and the current EPS can also be used to calculate the per share value of GES. The long-term growth rate of 14.67 can be used as a multiple to the current earnings of 2.94. This would result in a PEG ratio of 1 and would signify a fair valuation of GES. The resulting fair value is $43.13, representing a 47.40% increase from the current price of $29.26.

Though GES is a compelling investment, there a couple of risks that must be considered. Firstly, the sovereign debt situation in Europe and economic turmoil are currently having an impact on consumer confidence and sales. Looking ahead, the Company could see its revenues drop severely were some sort of black swan event to occur in Europe, as revenue from European Operations accounted for 37% of total revenue in 2011. Not only is the Company affected by declining sales in Europe, but the drop in the euro and the appreciation of the dollar in the past few three months has cut into margins. However, the recent announcement by the Federal Reserve whereby it promised to keep low interest rates up to 2014 should signal a weaker dollar for the future, all other factors constant. This suggests that there shouldn’t be any further drastic margin decreases due to currency fluctuations. Furthermore, it is also important to point out that EPS growth over the past twelve months (0.49%) has not kept up with ttm revenue growth (12.51%). This is signaling that the company may be becoming less efficient at managing its resources.

One of the major catalysts for the future growth of the company is the expansion in high-potential markets, primarily in Asia. Management has focused on expanding the global image of Guess and on opening new stores worldwide. In 2011 alone, the Company opened 112 stores. GES plans on opening 125 to 130 stores in Europe and the Middle East and another 70 to 75 stores in Asia. Asia has proven to be one of its fastest growing regions, with revenue growth from the Asia Operations segment in the past two years averaging 36.49%, far outperforming all other segments of the company.

Current shares prices are a great entry opportunity for the long-term investor. Not only is GES undervalued given its long-term growth rate, but it is also trading at a discount when compared with similar companies. This is evident in the various multiples at which the Company is trading, significantly lower than its peers. Furthermore, the current earnings of GES and the projected earnings growth warrant higher share prices. Management’s strategy of leveraging the brand name and of expanding into new markets presents a catalyst for future earnings growth. However, the macroeconomic conditions and, most importantly, the credit situation in Europe, must be closely monitored, as GES’s earnings are dependent on consumer confidence and discretionary spending. GES undoubtedly presents an excellent investment opportunity given its low valuation, but caution must be taken considering current global credit and confidence conditions.

FAS and FAZ

2011-12-30T15:36:00.000-08:00

I have been fooling lately with the idea of shorting both FAS and FAZ, which are the triple leveraged bull and bear financial ETFs respectively. Over the long-run, this should be a profitable pair trade.

This trade has been commented about numerous times in various market sites but I have yet to find a clear conclusion as to the risks involved.

The risks cited are paying occasional dividends and also a potential massive rally in one direction.

Sufficient capital in your account is therefore needed to act as a buffer so as to not get margin called out.

I am thinking about maybe buying long-term puts in both as an alternative strategy, or buying long-term calls as a hedge to my initial idea.

I have also thought about doing this with USLV and DSLV, the triple leveraged silver ETFs.

Look at the charts below of FAS and FAZ to get a sense of the profit that could have been gained had one shorted both of these back in November 2008.

Weekly Chart

I will be trying out some sort of pair trade with triple leveraged ETFs on a virtual account and see how it plays out.

SPY vs. Sectors

2011-12-30T14:58:00.000-08:00

Here is a chart for the performance of SPY and some of the SPDR sector ETFs in 2011.

ELN

2011-12-24T21:54:00.000-08:00

ELN's last close was at 12.99. This represents a market cap of 7.6B and a PE of 12.31 based on TTM EPS of 1.06.

The stock has a beta of 1.1. Institutional investors own 45.93% of shares outstanding. The short interest as a percent of float as of 11/30/11 was 1.44. ELN does not pay a dividend.

During the past 5 years, revenue has grown at 19% per year. It is trading at 6 times its sales and at 8.07 times its book value. The company has steadily diminished its debt since 2006, and current total debt from its last 10-K is at 1,270 million. ELN has a debt to capital ratio of 57.44%, which is fairly elevated and shows that the company is highly leveraged. The interest coverage ratio (EBIT/interest expense), however, is 17.52, signaling that the company can comfortably take on the debt.

Operating margin, at 65.32%, and net profit margin, at 49.01%, are among the highest for the Biotechnology and Drugs industry.

ELN's profitability is highly dependent on expanding its Tysabri sales. Tysabri is a multiple scleroris (MS) drug. However, analysts foresee increasing competition in the MS market which can negatively affect Tysabri sales and ELN's profits.

ELN is one of the top performing stocks of the last 52 weeks, up 117.95%. Expect it to fall back down to 12 and to then continue moving up. Keep an eye on ELN for a cup and handle pattern.

Monthly chart. Top trendline is resistance.

Weekly chart. Strong channel up. White horizontal line is resistance, as price gapped down from this point before.

Notice the strong run up and the cup pattern that has formed in the past 4-5 months.

1-year daily chart. ELN has been showing increasing strength compared to the market.

Bullish on AAPL

2011-12-24T12:17:00.000-08:00

Expect AAPL to continue to rise as it enters a positive cycle leading up to its earnings announcement.

I am expecting AAPL to beat its earnings estimates, and would get out of any long positions right after it reports these.

FFN

2011-12-24T11:33:00.000-08:00

FriendFinder Networks Inc. (FFN) serves as an example of the importance of carrying out fundamental analysis.

The stock traded at 10 at the time of its IPO on 5/11/11. Now it is trading at 0.59. Why such a drop? FFN has a total debt of 526 million as of its 2010 10-K. Its net income for 2010 was (43, 153,000).

This stock was a perfect short candidate at the time of its IPO due to its debt burden and its lack of profitability.

Notice how the stock popped 38% from .54 to .75 on high volume on 12/23/2011, only to then drop back to .59 by the end of the day. Is it a good time to get in?

I would say not, just because this company's financial statements suggest no reason why one would want to invest in FFN. There are definitely better companies with more solid fundamentals that give one exposure to the internet social networking space.

Bullish on BAS

2011-12-24T11:05:00.000-08:00

Check out the chart for BAS:

https://www.tradingview.com/v/qUrYNSgr/

Bearish on CRM and AMZN

2011-12-24T10:55:00.000-08:00

CRM and AMZN have been underperforming the market as of late and are interesting short candidates.

CRM is trading at a PE of 4,694. AMZN is trading at a PE of 93.40.

AMZN's earnings per share are projected to grow at a CAGR (compound annual growth rate) of 30 during the upcoming 3 years. Using this number, its PEG is currently 3.11, suggesting AMZN is significantly overvalued.

Both AMZN and CRM are due for major corrections.

Bullish on SINA

2011-12-24T09:48:00.000-08:00

SINA has fallen significantly from its high of 147.12. It is now trading at 55.79, representing a PE of 60 based on the current year's EPS estimate of .93.
The average analyst target price is 107, which is 91.8% above the last closing price.
Short interest as a percent of float is at 8.67 as of 11/30/11.
Look for a bounce in the shares to a price around 78.

Bullish on SPY

2011-12-24T08:44:00.000-08:00

Here is a chart I had made previously in which I present a bullish case for the market.

Make sure to load the new bars so that the chart reflects up-to-date data.

https://www.tradingview.com/v/YXeNDxIM/

Bullish on SPY

2011-12-24T08:36:00.000-08:00

I expect the market to rally back to the year's highs, with SPX reaching 1350 in the coming couple of months.

Check out my chart for SPY on TradingView:

https://www.tradingview.com/v/COddhNwu/

Bullish on FOSL

2011-12-24T07:19:00.000-08:00

I consider that as time passes the market in general will continue to move up as investors become used to the constant Euro-zone worries. FOSL will move as the market does. FOSL has shown that it can rally 50% in just a month, as it did in October. The short percent of float in the stock is at 7.87% (as of 11/30). At 4.130M, the amount of shorts is very significant compared to prior amounts of short positions in the past. The market is very bearish on FOSL currently, and I believe that as it starts to tick up with the general market, a lot of shorts are going to get squeezed. Furthermore, one has to consider the possibility of a late-year rally in the market that can move into the first half of January, particularly in consumer discretionary stocks as the holiday season can provide a boost to the sector. The fundamental bearish argument against FOSL is that gross margins will be pressured due to the recent weakness of the euro and the recent strength of the dollar. The risk is also present of a future increase in Chinese wages, which is expected to take place in the spring of 2012. However, management believes that the GM pressures can be offset by a higher mix of direct-to-consumer and Asia sales. For the long-run, the watch trend is expected to continue, particularly in Asia and Latin America due to the increasingly growing middle class. FOSL is currently working on expanding in Asia. It sees reaching $1 billion in revenues from Asia compared to the $305 million it makes today in the region. The fact that the company has bought back 2.1 million shares at $195 million and that it still has $338 million authorized for further repurchases demonstrates the strength of the company and its confidence in its own future. This will help to further increase EPS and appreciate the stock price. FOSL stands on $225 million cash net of debt. As of yesterday's close, it is trading at a P/E of 20.40. FOSL's net income experienced a CAGR of 28% during the 5 years leading up to 2010. Revenues increased 31.17% in 2010 and net income increased by 83.58% in that same year. It is projected that its bottom-line is to grow at a yearly rate of 20% in the following years. Using the current price and the earnings growth estimate of 20%, it is currently fairly priced at a PEG of 1. Ten analysts have it as a buy and five have it as a hold, with 0 suggesting to sell. The average analyst target price is $113, representing a 31.5% gain from yesterday's closing price near $86. It is to report earnings on Feb. 14, and, I believe that a price of $112 will be reached much before that. I consider that, fundamentally, FOSL is a very strong buy in the high $70s and low $80s. I would look to get out at a price above $110 whenever the technical indicators point to a change in momentum in order to secure my profits in this volatile and headline-driven market.