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Contents - · PDF file31/07/2018 · why small misses are causing huge moves and ask yourself if you can handle that. At the end of the day, ... can use. They

Aug 24, 2018




  • 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

    ORIGs Comeback - by David Bartosiak 15

    The AVGO Campaign - by Kevin Cook 19

    What to Do Next 29

  • 3The Best Trade I Ever Made

    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 wasnt 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.

  • 4The Best Trade I Ever Made

    My ULTAmate TradeBy Tracey RyniecValue and Insider Strategist

    Ill admit that Im 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? Whats 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, weve 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 dont 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.

  • 5The Best Trade I Ever Made

    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.

    Whats 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 Wasnt 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.

    Thats why, if youre 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

  • 6The Best Trade I Ever Made

    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 wasnt 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.

  • 7The Best Trade I Ever Made

    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 its still growing those numbers quickly. Membership jumped 23% year-over-year in the second quarter. Thats 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 whats going on behind the scenes at the company. They want to make money off of the stock too. So if theyre 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, Im 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.

  • 8The Best Trade I Ever Made

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

    Aercap. Thats 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.

  • 9The Best Trade I Ever Made

    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 wasnt 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 didnt 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 Interna