Contents - staticx-tuner.zacks.com · 31/07/2018 · why small misses are causing huge moves and ask yourself if you can handle that. At the end of the day, ... can use. They show

2The Best Trade I Ever Made

ContentsOverview 3

My ULTAmate Trade - by Tracey Ryniec 4

Flying High with AER - by John Blank, Ph.D. 8

Trusting My Gut on DATA - by Brian Bolan 11

ORIG’s Comeback - by David Bartosiak 15

The AVGO Campaign - by Kevin Cook 19

What to Do Next 29


Best Trade I Ever MadeWe asked 5 Zacks stock market experts to relive their all-time personal favorite trades, and then share what they learned from the experience.

As you will see, they warmed to this task. There are few things a trader loves more than to revisit an outstanding success.

Tracey Ryniec writes about how her observations as a shopper at Ulta Beauty stores led to a massive gain for her stock portfolio.

Dr. John Blank relates why he liked Netherlands based Aercap, an aircraft leasing company. He wasn’t the only one who saw its virtues. A major merger soon sent its shares soaring skyward.

Brian Bolan followed his faith in the “Big Data” revolution to a quick gain in Tableau Software (DATA), and then followed his gut to sell after 5 days just ahead of earnings. He got out in the nick of time.

David Bartosiak shows how a “perfect storm” of technical and fundamental signals led him to giant gains from Ocean Rig, a stock with a share price that hovered around $1.

Kevin Cook details how he made multiple trades (and multiple double-digit gains) in Broadcom over a span of two years.

Read on for an inside look at how some of Zacks’ most successful traders make their key decisions.


My ULTAmate TradeBy Tracey RyniecValue and Insider Strategist

I’ll admit that I’m a “buy what you know” type of investor. I look for investment ideas in my everyday life.

Are all my friends suddenly shopping at a certain yoga clothing store?

Are they raving about a new restaurant chain that just opened up in the neighborhood, saying they waited two hours for a table on a Tuesday night?

Is the plane full on my flight from Chicago to Los Angeles? Are the passengers raving about the free in-flight wifi, or are they cursing it?

I start there and then I will do research on a company. Fundamentals are still very important.

Is the company making money? What’s the growth plan? Are earnings estimates rising? Are the shares cheap or expensive?

How a Rewards Program Led Me to My Best Trade

Ulta Beauty (ULTA) stores have been around a long time. The company is headquartered in the Chicago suburbs, so for those of us in the Chicagoland area, we’ve been familiar with them for forever.

It sells middle of the road make-up you would find at a drugstore with some prestige brands that are sold at department stores. The stores are easy to navigate and shoppers don’t feel intimidated by high prices.

I had shopped at Ulta off and on for years but also bought my shampoo, make-up and other personal care products at a variety of stores such as Walgreens, CVS and Target.


Then, in 2013, when I was checking out with a purchase, Ulta persuaded me to join its ULTAmate Rewards program. Did I really need yet another reward program card sitting in my wallet? No. But, since it was free, I figured “why not.”

Little did I know that this would be a Rewards Program that I would actually enjoy and reap a lot of benefits from, in more ways than one.

What’s so great About the ULTAmate Rewards?

The ULTAmate Rewards program is genius. I rank it as one of the top in the retail business.

It actually rewards you with a lot of freebies. For real. And it makes you feel special by giving you a free birthday gift every year (yes, this matters) and special coupons.

Suddenly, I was doing all of my shopping for personal items there because the Rewards Program was so fantastic. I wanted to accumulate as many points as possible. The more you get, the higher status you can acquire.

So in 2013, because I loved the Rewards program, and was shopping a lot at Ulta, I bought some shares of the stock.

The Road Wasn’t Always Smooth

By 2013, Ulta was growing quickly across the United States. Its strategy was to grow in strip-mall based locations, mostly in suburban and moderate sized cities.

That’s why, if you’re in Manhattan or San Francisco, you may not have ever heard of Ulta. It has steered clear of big urban centers.

But it hit some bumps in the road during this expansion period. While the ULTAmate Rewards program was successful, it was trying to make a transition to online commerce as well. Its website was old and clunky and there were distribution issues.

The company went through a CEO change in June 2013, bringing


in Mary Dillon, the former CEO of U.S. Cellular. Earlier in her career she had been in marketing at McDonalds and had also worked at PepsiCo. There were a lot of doubts on Wall Street about her ability to manage a retail company.

Then, in late 2013, Ulta missed on earnings for the first time in years. With the jitters already in the market about the new leadership, the shares sold off big.

You can see that miss in the red arrow in the middle of the Price & EPS Surprise chart.

Being a fan of the company, and seeing that the rest of the fundamentals were still solid, I considered this sell off a buying opportunity in the shares. I bought some more.

The Insiders Jumped in to Buy

I wasn’t the only one who saw an opportunity.

Mary Dillon, the new CEO, bought 5,000 shares on the open market in March 2014 and another 4,000 shares in September 2014, as the shares lagged. Combined, she spent about $1 million gobbling up the stock.


It was a sign that management believed in what was going on at the company.

Big Sales Growth Thanks to the ULTAmate Rewards

Never doubt the power of freebies.

As of the second quarter of 2017, Ulta has grown its ULTAmate Rewards program to 25 million members and it’s still growing those numbers quickly. Membership jumped 23% year-over-year in the second quarter. That’s coming on the heels of double digit membership growth in 2016.

Over 80% of all sales are generated by ULTAmate program members and the members tend to buy more than non-members.

The result is that Ulta is posting the best sales comparables in the retail industry and the shares have more than doubled since 2013.

What Are the Lessons from This Trade?

1. The “buy what you know” strategy can work but be sure to investigate the fundamentals before jumping in.

2. Pay attention when the insiders are buying. They know what’s going on behind the scenes at the company. They want to make money off of the stock too. So if they’re buying, there may be something good going on there. I had bought before Mary Dillon, the CEO, bought her shares. But even if I had waited until she bought, I still would have doubled my money.

3. Trust your instincts. I still love Ulta and love getting my reward

points. Until that changes, I’m betting on this company.

Tracey Ryniec is Zacks’ authority on value and insider-based investing. She serves as editor for the Value Investor and Insider Trader portfolio services.


Flying High with AERBy John Blank, Ph.D.Chief Equity Strategist

Aercap. That’s definitely my best stock picking call at Zacks.

This is a Netherlands based aircraft leasing stock. It is currently about $7.45 billion in market cap, but it was a mid cap stock at $3 billion or so in late 2014.

When we bought it for our international trading service it was in the $18 to $20 a share range. We closed this trade near $40 a share just a few months later. That was a short-term return of over +100% for those who had bought the shares.


Today --Aercap as a stock in June 2016-- still exhibits many desirable features that attracted me in late 2014.

• The Zacks Value score, then and now, is an A. The Forward P/E ratio is 6.46 currently. The PEG ratio at 0.76 is very low.

• The Zacks Growth score, then and now, is a B. The 2016 annual EPS estimate is $5.90 and 2017 looks for $6.27 a share. There was always steady annual EPS growth to chase.

• The stock has beaten 3 of the last 4 quarters, with an average quarterly beat of +9%. It was beating EPS consistent back in 2014 too.

The big difference between the stock now, as it range-trades back forth from $38 to $46 a share, and in late 2014, is share price momentum.

Nowadays, the Zacks Momentum score is F for Aercap. In late 2014, I noted a consistent upward pattern to share trading. This trend would have surely given it a Zacks Momentum score of A.

This was a noticeable upward trend you could eyeball. I could count on it. It wasn’t overly strong, but it was consistent. Confirm it yourself in the chart I provided.

Then, I would notice, every 4 to 6 weeks, what I called the “Big Hippo”. I would see AER share prices move up, all at once, in a swift one-day +3 or +4% gain. On those days, there was lots of extra share volume trading hands.

I didn’t know what was going on.

Now I do. Someone had been tipped off about a coming merger between Aercap (AER) in the Netherlands and the Los Angeles based part of AIG, called International Lease Finance Corp. (ILFC), the most profitable part of that troubled company. AIG unloaded the firm to Aercap and took a large stake in the combined company. That sent the shares into a blast-off.


In effect, I got us in front of a major, and very profitable merger.

Merger calls can’t be fully seen in advance. In fact, if you did see them in advance, you would be accused of insider trading. It is clear (in hindsight) that someone was ordering huge volumes of share purchases every once in a while. That was what was driving up the share price, in the moves I called the “Big Hippo” in my nightly commentaries.

The Key Insight

It wasn’t erratic momentum trading, but very consistent momentum trading, with support from jumps in volume on those big days. That really made the difference.

What are the secondary lessons you can learn from Aercap?

First, the basics of the company’s strong business niche and the share story remain totally secure. Aircraft leasing was a great niche. It threw off lots of cash. AER shares were and are still undervalued. The merger of a company into one like this was a desirable event for somebody -- looking at cash flows and balance sheets and securities valuations.

The other secondary relevant fact (in hindsight) was market capitalization. Swallowing a multi-billion dollar company is too much for most acquirers. Aercap was just a $3 or $4 billion size firm. So was ILFC.

The most important thing I learned -- follow the money of the big investors, as it pertains to share price momentum.

Dr. John Blank is Zacks’ Chief Equity Strategist, and directs the Large-Cap Trader portfolio.


Trusting My Gut on DATABy Brian BolanAggressive Growth Strategist

When I was first given the task to write up my best trade ever, I immediately thought about the time I bought some Amazon (AMZN) options and made 17x my money in three weeks. That was a great trade and easily my most profitable, but it wasn’t my best trade.

The best trade was something far different, as it required a lot more. The AMZN trade had a very specific time horizon as the options I purchased had an expiration date so they would either be in the money and worth something or out of the money and worth nothing. My best trade had a lot more to it including touch of luck and a whole lot of gut instinct.

The Trade

With the market swinging up and down, I saw a tech stock that I have followed for a long time trade at what I thought was an attractive price.

Tableau Software (DATA) is a provider of software that helps users visualize massive quantities of data. This one of the play to the “Big Data” theme that I believed would be a nearly sure bet as corporations mined data about their customers to offering them ever more enticing goods and services.

I instructed subscribers of Zacks Game Changers to add 100 shares of DATA on January 27, 2016 with the stock trading around $75 a share.

At the time the stock was coming off a big beat and raise quarter saw the stock move higher by 16% the day after the report. The idea going into the stock was that earnings were only a few days away on February 4, and it looked like we could see the stock ramp up into


the number.

The stock had a 0% Earnings ESP, so this was more of a rebound play than anything that told me there was a chance of another big beat. At the same time, the Zacks Rank of #3 (Hold) was telling me that estimates were not moving lower (combined with the flat ESP number) so the implication of a lack of negative news or headwinds for the stock.

Earnings Approaching

There was one week and one day before earnings for DATA when I bought it. The early idea was clearly to hold the stock through the number and look for a big pop from another beat and raise.

The year ago quarter was a huge beat that was driven by 75% year over year revenue growth. That quarter saw the stock move higher nearly 19% the day after the print, so I was fully expecting a big move.

On Thursday and Friday I saw a few other tech companies’ report and the results were not impressive. Stocks that beat were not going up that much. Stocks that met the number were going down and any one that missed was more or less sent to the electric chair.

Over those two days and the morning of February first, I saw several stocks get crushed for losses of 15% to even 20% on small misses. Needless to say I was starting to get somewhat worried about being long a tech stock just ahead of an earnings report.

Showing A Gain

After 3 short days, I was showing a solid gain of roughly $5 per share or about $500 for the trading service. My gut was telling me that this could be an instance where a bird in the hand is worth more than two in the bush.

I moved to sell the stock as it was roughly $80 and locked in a somewhat small profit of $460 or 6% on the capital invested. Over a holding period of three days I can tell you I was pretty happy and


left the door open to get back in before the earnings report just a few days later. This was a trading service after all and I was looking for a chance to buy those 100 shares back a dollar or two cheaper than what I sold them at.

I never got the chance to buy back in and watched the news feeds the evening of the report.

The Report

The numbers rolled in across the screen and I saw DATA posting a beat of the Wall Street number of $0.18, for a positive earnings surprise that was more than 100% ahead of what was expected. But that is basically where the good news started and stopped.

Revenue growth slowed to 42% from 63% in the previous quarter and down from 75% a year ago. That is a huge red flag, but it wasn’t the thing that killed the stock.

Guidance called for lower sales and earnings to move from a gain in the next quarter to a loss. This is the move that took all the air out of the balloon.

Wall Street punished the stock sending it down 48% in the session following the report. It continued to move lower over the next few days, but the damage was more than done.

What I Learned

I wish I could tell you that there was some tip or tidbit of information I came across to tell me to sell this stock. Some of you will call it all luck, and I am fine with that, but I will call it gut instinct.

Selling before the number made subscribers a small amount of money, but it also saved them a massive amount too. This is the first lesson, never be afraid to take a small gain.

Watching the markets try to rebound after a few weeks of selling drove me to chase a few stocks. DATA was one of those stocks and the report was only days away. In watching other tech stocks


narrowly miss, I realized that just beating might not be enough for this stock. The second lesson is understanding the tone of the market at earnings season is crucial.

The risk reward scenario for holding DATA through the number had shifted greatly where it was last quarter. The next lesson is to be sure to look at the expectations for this stock, and if they are sky high, you might find your stock crashing to the ground.

Finally, the most important lesson from this trade is to trust your gut. This is more of a sell thing than anything else, but it is essential to making a good trader. Watching the market is more than just reading the releases and looking for beats and misses. You have to look at why small misses are causing huge moves and ask yourself if you can handle that. At the end of the day, my gut told me expectations were too high and I had a 5% win ready for the taking.

Summary

I have made trades that earned tens of thousands of dollars for myself personally, but this is the best trade I made not because it was a $460 winner. It was the best trade because I trusted my gut. A 50% haircut on any position is a devastating blow and requires a 100% move higher just to get back to even. Taking a small gain of 6% saved me from a loss of 50% or more and not losing capital is almost as important as taking gains on that same capital.

Brian Bolan is Zacks’ Aggressive Growth Strategist. He runs the Stocks Under $10 and Home Run Investor portfolios.


ORIG’s ComebackBy David Bartosiak,Technical & Momentum Strategist

The best trades aren’t the ones that yield the greatest return. You can stumble on those through blind luck. The best trades are the ones that are logical and repeatable. They teach you something about the market or a stock and help you gain insights into future potential behaviors. In other words, the best trades teach you more about trading.

One very important element of making money on a stock trade is being able to see something that the market doesn’t at the time of your purchase. This is the root of stock analysis. The fundamental guys believe their concentration on the nuts and bolts of the business, balance sheets and such, gives them an edge. It helps them uncover great investing opportunities that others simply can’t see at the moment.

The same goes for the purely technical analysts out there. The TA guys are looking for the perfect set up of price, volume, moving averages and indicators to give them a clue of when a stock is about to pop. How many times have you heard someone talk about “a great chart” a “trend line” or a “bullish pennant” developing? Thousands.

My best trade ever taught me to take a little from both the fundamental and the technical camp and throw in a little something else. At the most basic level, a stock price is determined by a stock’s earnings multiplied by its valuation. Makes sense that price divided by earnings (P/E valuation) multiplied by earnings (EPS) equals the price, it’s math.

At Zacks we go to great length to calculate the EPS side of the equation. We study the earnings estimates of various firms on Wall Street in order to gain a consensus, then we track the evolution of


that consensus over time. I believe our Price, Consensus and EPS Surprise chart is one of the most effective charts an investor can use. They show the clear cut relationship between earnings and stock price.

What’s more difficult to visualize is what makes up valuation. Why does one stock have a P/E of 10 when another has a P/E of 20? The main determinants of valuation are deeply rooted in future expectations and can be tied into earnings. Growth companies, for example, typically have much larger P/E ratios than value companies. Reason being, investors are willing to pay a higher multiple of current day earnings for a stock they believe will earn substantially more in the future.

I like to look for opportunities where the market has undervalued a stock because they don’t believe a certain growth event is likely to take place. This sort of event has an effect on both sides of the equation. Not only are investors willing to pay more for stocks


they believe will grow substantially, but a boost to current quarter earnings can really provide a shot in the arm for a stock.

Thisperfectstormsetupagreattradeforme.

I found a stock that had earnings estimates all going in the right direction, a technical chart that was sizing up for a big break through, and was leading up into a game changing event. The stock that I’m talking about is Ocean Rig (ORIG).

The entire market had turned its back on oil stocks as crude collapsed. Everyone in the oil patch from major diversified companies to exploration and production companies was feeling the pressure. There were major questions about solvency and doubts clouding the future.

It should come as no surprise that a company involved in off shore drilling would be in trouble in a scenario like this. If oil were to remain severely depressed then the costs associated with drilling off shore for oil would be prohibitive. It would be impossible to make money.

When the tide had turned to a negative extreme for Ocean Rig, there was a small bounce off support on the technical chart. I found it interesting that a stock like this could be finding a bid while the headlines were so bearish. It certainly wasn’t a sharp bounce and a rocket straight up, but the price was firming.

The real excitement didn’t hit until the Zacks Rank began to turn around. This was the perfect “Don’t throw the baby out with the bathwater” scenario. Even though shares of Ocean Rig had dipped below $1 the company was still making money. EPS was positive and by a wide margin. The P/E was under 1! Meaning the company made more money per share than the stock was trading at. The valuations were absurd!

Now, obviously the growth was not there. Worries were plentiful as investors didn’t believe in the company’s long term prospects. Yet the earnings estimates had already established a floor and were moving in a positive direction. Of course I would have had no way of knowing this unless I was paying close attention to the Zacks Rank.


As the stock became a Zacks Rank #1 (Strong Buy), the market headlines were decidedly negative and the chart began to show signs of support, I knew it was time to start adding. I didn’t just make a single buy here with ORIG but rather legged into the trade over several weeks. That’s the beauty of this trade because I didn’t need to get the timing perfectly right, I just needed to get in the game and let the Zacks Rank do the heavy lifting.

I added to ORIG at prices ranging from 77 cents to $1.10, the whole while believing in the intermediate term thesis. This was a beat down stock in an industry that’s been pummeled that’s likely to stage a comeback. The stock rallied sharply since April, 2016 getting all the way to $3.38 before selling off into early July. I continue to be watchful for new entries.

Big Lesson from a Small Cap

It was the repeatable process that shaped up here on this trade that makes it my Best Trade Ever. With it, I’ve learned to look for that combination of a turnaround in the Zacks Rank, support in the technical chart, and change in market expectations and perception that can have a drastic effect on valuation. Armed with this recent success, I’m eager to find the next big winner for my portfolio.

David Bartosiak is Zacks’ Technical & Momentum Strategist. He runs the Momentum Trader and Surprise Trader portfolio services.


The AVGO CampaignBy Kevin CookSenior Stock Strategist

When I think about good trades, the stock that immediately comes to mind is one I traded repeatedly in a span of two years from mid-2014 into 2016.

Once known as “Avago” the company was renamed Broadcom this year, but kept the original stock symbol, after the acquisition of the new namesake in the first quarter. Got that?

To keep things simple, I’ll just use the stock symbol AVGO throughout this report after this quick “get to know AVGO” introduction…

Broadcom Limited (AVGO) is a $60 billion diversified global semiconductor leader built on 50 years of innovation, collaboration and engineering excellence. The company designs and develops a broad range of analog, digital, mixed signal, and optoelectronics components and subsystems.

The name “Avago Technologies” was born in 2005 when KKR and Silver Lake Partners acquired Agilent’s Semiconductor Products Group for $2.66 billion, creating the world’s largest privately held independent semiconductor company. They brought Avago public in August of 2009 as a Singapore incorporated company with headquarters in San Jose, California.

Broadcom’s extensive product portfolio serves multiple applications within four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial. Applications for their products in these end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.


AVGO’s most high-profile customer is Apple for whom they make various wireless semiconductor solutions, including power and signal filters and amplifiers.

In the enterprise market, where they help large companies access data centers, cloud storage, and telecom networks, Broadcom is considered an essential hardware provider of network processors and Ethernet switching components.

In July of 2014, I bought shares of AVGO around $72 because it was a Zacks #1 Rank that had just experienced a massive uptick in institutional ownership in the second quarter of that year. The “old” AVGO had 2013 revenues of $2.65 billion.

The impetus for this new flood of money was that AVGO had purchased LSI Logic and was replacing that company in the S&P 500.

So not only did many institutions “have to buy” the stock, but many others also wanted a piece of the action in this “arms dealer” for not only iPhones but also the 100-Gigabit enterprise communications/data network buildout.

In computer networking, Gigabit Ethernet (GbE or 1 GigE) is a term describing various technologies for transmitting Ethernet frames at a rate of a gigabit per second (1,000,000,000 bits per second).

The Campaign Begins

Buying AVGO in the low $70s turned out to be great idea not just for the risk-reward “edge” I saw, but because it inspired me to get to know the company and its industry really well. I was fascinated by this Gigabit “arms dealer.”

By September, it was trading all-time highs near $90 because the “revenue ramp” was on with 2014 projections looking for over $5 billion.


With 20%+ gains in AVGO shares in the summer of 2014, I decided to take some profits headed into the potential for a classic autumn correction. Sure enough, the October “Ebola” swoon that year knocked the stuffing out of lots of stocks, including AVGO.

To make things more complicated, a semiconductor analyst from Goldman Sachs decided that the global economy was weakening enough for him to call the top in the chip cycle. He downgraded most chip stocks, including AVGO.

But I did some homework and could find no firm basis for his analysis, especially as no global recession was imminent. Plus, many other analysts were still very positive on AVGO and its earnings momentum -- the upward bias of their estimate revisions -- was keeping it a Zacks #2 Rank. So I bought again in the $70s.

And after the Ebola correction wore off and cooler heads prevailed, the stock marched right back to $90.

But then I made a “too cautious” mistake that every investor tends to do when the gains are rich and you take your eye off of the long-term story. I grabbed the profits too soon, settling for another 20%+ winner instead of seeing, and sticking with, the real potential of the company.

Here are those first two trades with actual trade dates and prices bought and sold...

AVGO: Long on 07/17/2014 at $72.55 Sold on 09/05/2014 at $87.65 NetProfit$15.10or+20.81%


Luckily, I kept doing my homework on AVGO, and it helped that analysts made it a Zacks #1 Rank again. I didn’t think twice about jumping back in near $100. Here’s how that trade worked out for a chunky 2-month swing as more investors discovered the powerful AVGO growth story and powered the stock to new heights...



Sure I left $12 on the table in that 3 weeks I was out of the stock between late November and early December. But that kind of regret should never blind you from looking forward to new opportunities with great companies.

The Campaign Heats Up

After some February and March volatility, my research told me it was time to re-load AVGO for the next leg higher. Institutional accumulation was strong and analysts kept acting like they had just discovered the story.

The big Q4 2014 earnings beat that vaulted AVGO from $113 to $130 in February caused more to take notice and raise estimates, moving shares back to a Zacks #1 Rank. So I jumped back in at $127.

Why? Because revenue projections for 2015 were marching north of $6.5 billion now and the forward P/E multiple was still an attractive 15X with EPS estimates for the year at over $8, representing 45% growth over 2014. That’s growth you pay a higher multiple for, even if it’s a technology hardware company.

Then April brought more market volatility and I was sweating just a bit holding on to AVGO under $120. But I reviewed the thesis and the growth outlook and decided that if I made any moves it would only be to add to the position under $120.

Smart move! In early May of 2015, 3 weeks ahead of the company’s Q2 report, AVGO shares started a very vertical ascent, getting back above $130.

Then on May 27, a day before their scheduled report, they announced something big. Here was the Bloomberg.com headline...

Avago to Buy Broadcom for $37 Billion in Biggest Tech Deal Ever


This sent shares surging to new all-time highs above $145. And being ever-tactical, I decided to bank some coin again...


The Campaign Matures

The sideways market of 2015 proved challenging for most money managers and stock pickers. But as easy as it was to become bearish as times, I was confident that strong growth stocks and market leaders like AVGO would continue to be winners in this uncertain environment because, once again, the global economy wasn’t going into recession.

Still, I had to take my first loss in AVGO after the Chinese shocked global markets with a sudden 2% devaluation of their currency, the yuan. I looked at selling the stock more as a preemptive move on global-macro uncertainty and volatility than on company-specific risk.

And I was soon handed good opportunities to trade AVGO shares during that summer of continued shocks, including a day when the markets experienced another mini “flash crash” on August 24 where Nasdaq stocks traded down to levels that we haven’t seen since -- like the QQQ tracking ETF for the Nasdaq 100 going down to $85!

Here was that first loss, and then also a profitable exit into that volatility. These two trades were actually “half” positions (5-8% allocations) that were entered and sold at different times across Q2 and Q3, giving me a “full” position most of that period…

AVGO: Long on 06/08/2015 at $139.00 Sold on 08/10/2015 at $127.00 NetLoss-$12.00or-8.63%



And just to give you an idea of the tremendous volatility in late August of 2015, on the 24th, AVGO shares traded down to $100 and 3 days later were back above $125 where I sold!

AVGO should never had traded down there -- just like the QQQ shouldn’t have gone to $85 -- especially before earnings where they once again delivered a stellar quarter and raised guidance.

The lesson here is to always be ready for huge sell-off days to buy your favorite stocks on sale. Unfortunately, I was swept up in the emotional panic of the 24th and missed a great chance to scoop more AVGO under $110.

But after the markets rocked and rolled a bit more into the autumn months, I got another chance to pick up AVGO shares below $120. Here’s exactly what I wrote to subscribers in an intra-day Buy Alert on October 20, 2015...

Portfolio is buying a 10% position in Avago Technologies(AVGO)between$117and$119.Trading$118.30at12:50pmET.

As we’ve talked about for a few weeks, we want to own this Zacks #2 Rank stock in the mid-teens. With the strength in Semiconductors and Tech -- strongly indicating that sector/industry correction is over and we are not at a global cyclical top yet -- sooner is better under $120.

Especially since BlackRock was seen nibbling a small amount of shares early this month, probably on those dips below $115. In an Amended 13G dated October 9, the firm revealed their stake moved up to 4.8%.

And here was the extremely positive analyst note I mentioned last night...

Brean Capital analyst Mike Burton was out pounding the table on Avago Technologies this week, reiterating a Buy rating and price target of $170, which implies an upside of 45% from current levels. According to TipRanks.com, Burton has a 11.7% average return when recommending AVGO.


Burton noted, “We are updating our pro-forma model for the Broadcom (BRCM) acquisition and adjusting our target multiple as market multiples have compressed. We reiterate our $170 TP based on $11.89 in earnings in CY17 and therefore we believe the stock is incredibly cheap, especially given the combined company will be a powerhouse in communications semiconductors poised to deliver above-industry growth with best-of-class profitability and free cash flow.”

(end of October 20, 2015 trading service alert)

This fundamental stance, which was shared by at least a half-dozen other Wall Street analysts with price targets between $140 and $170, strengthened my thesis for continuing to own AVGO and trading it. And you can see that here in these two “ka-chings!”

AVGO Long on 10/20/2015 at $119.00 Sold on 11/06/2015 at $129.00 NetProfit$10.00or+8.40%


TheCampaignGetsa$200PriceTarget

But I screwed up, again! That last sale was another “take the money and run” right before earnings when I was worried about the broad market weakening before the next Federal Reserve meeting, as they were expected to raise interest rates for the first time in a decade.

And you know what AVGO did when they reported on December 2? Yep, they knocked the cover off the ball again and shares vaulted to new all-time highs above $145!

Was I sad and heartbroken? Not really. When I made that sale, I explained in advance to my customers in my trading service newsletter that it was a tough decision and I wanted them to think it over first.


I wanted them to think about the powerful fundamental growth story of AVGO and whether the money they had in the shares was short-term trading money or long-term wealth-generating money. If the latter, then stay with AVGO. Many did and wrote to thank me later.

Sometimes, those letters are my greatest reward. When you can help someone grow their wealth, you are fortunate to be a part of something that blesses multiple people and touches many lives for the better.

Well thankfully, it wasn’t very long at all until we got another chance to jump back in AVGO after the Fed hiked and markets melted down in early January on the FOMC “dot-plot” forecast of four more hikes to come in 2016.

After marking a new all-time high just under $150, AVGO shares skidded under $130 into that “Happy New Year 2016 correction.”

But I was licking my chops, especially after reading a research report by Bank of America/Merrill Lynch analysts where they laid out their bullish thesis for the company -- and a $200 price target on the shares!

So I made my move on January 7, with this note to subscribers...

AvagoTechnologies(AVGO):Buying10%allocation. We sold this Zacks #2 Rank too early before the blow-out earnings that vaulted shares to new highs near $150. But we are getting back in on this panic as institutions will likely be adding down here below $130 too. In addition to the BofA/ML call I told you about, FBR Capital Markets just initiated coverage with a $185 PT.

During the nasty stock market correction of Q1 2016, where oil slid to $26 a barrel and the S&P broke down to 1812 in January and tested it again in February, AVGO hit corresponding lows of $117 and $114.


But I hung in there and told my subscribers “no matter what, you buy AVGO every chance you get near $120!” As dark as things seemed in February, I knew that AVGO would be a strong leader once the market found its footing.

Once again, that Q1 volatility was just another gift because the strong market recovery of March and April was spearheaded by our strong leader, who made another new all-time high just below $160 on April 13.

Did I sell? Nope. I hung on because all the lights appeared green to make a run for $175 in Q2.

We even had to suffer a trip to $140 in May. Here’s how we ended up riding the waves from January to June...


Perfect? Nope. Once again, I sold the day before earnings and missed yet another strong report that vaulted shares above $165!

See the pattern? I’m often too cautious into earnings, but I know when to dig in and hold my ground, or buy more of a great company, on the big pullbacks!

The Lessons of the AVGO Campaign

The main theme here is that if your stock screening uncovers a Zacks #1 or #2 Rank with solid growth fundamentals and expanding market share, you want to take part in the inevitable long-term advance of the stock as it swings through quarters of “love and hate” by investors.

The great advantage in following the Zacks Rank in large and mid-cap stocks is that it puts you on the right side of analyst views of the growth story. If they are raising estimates every quarter because the company keeps executing and offering positive surprises -- or the occasional M&A deal that enhances the business and is quickly accretive -- then you have a significant tailwind at your back.


Even though I traded the stock and couldn’t help my customers benefit from long-term capital gains, we still caught a double in share prices from $72 to $155. That kind of nimble action is worth the tax bill in my book since there are many times I slept better being out of the stock.

My only regret is that I didn’t trade more stocks in an AVGO-style campaign! It is definitely the template for “how it’s done!”

Kevin Cook, Zacks’ Senior Stock Strategist, directs the TAZR (Technical Analysis + Zacks Rank) and Healthcare Innovators portfolios.


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