Top 10 List as of 03/17/2013
While there are some highly rated stocks in this week’s Top 10, overall the ratings dropped from an average rating of 9.18 last week to 8.98 this week. When the overall rating drops below 9, it has served as a confirmation that many of the true leaders are already well extended. This makes sense to me because the last correction only lasted about a week, not nearly enough time for the true leaders to form new bases.
Even though many of the true leaders are extended at this point, it’s important not to chase extended stocks. A stock is considered extended when it is 5% or greater past a proper buy point. Buying extended stocks makes it easy to get shaken out on a normal pullback of 7-8% which would trip the maximum loss cutting rule. It’s for that reason that I prefer to generate a list of “Ready” stocks which are setting up in primary bases and filter out the top 10 based on rank.
This week there are some highly rated stocks in the Top 10 (EVER, MX, and OCN are above 9 this week) but most are on the list by virtue of there not being very many highly rated stocks setting up in bases presently.
| Rank | Rating | Symbol | Name | EPS Due Date | Notes |
| 1 | 9.65 | EVER | Everbank Financial Corp | 05-23-2013 |
BASE/CHART: EVER formed a 2nd stage double bottom that is 17wks long, 21% deep, and has a $15.83 pivot. There are 7wks down and 10wks up. Most weeks have finished in the top of their range and on rising vol. EVER nearly tripped the 8% sell rule but found support at the 10wk line. The RS line declined and needs to recover. The RS rating is 81. 10 so far. EARNINGS: annual earnings are estimated to rise 16% this year. (-.25) The EPS growth rate is strong at 36% but the earnings stability rating is weak at 45 and the ROE is lower than what I look for at 12%. (-.3). Quarterly earnings and sales are strong and the quarterly sales have accelerated the past several quarters (+.25) 9.7 so far. GROUP: currently ranked 31 OWNERSHIP: fund ownership has risen since inception and the number of funds leaped about 40% in the most recent quarter. Mgt holds 41% of shares. However, there are no top funds in EVER (-.05) OVERALL: 9.65
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| 2 | 9.65 | MX | Magnachip Semiconductor | 04-22-2013 |
BASE/CHART: MX formed a flat base that is 5wks long, 12% deep and has a $16.80 pivot. It failed on it’s first attempt to breakout and tripped the 8% sell rule. However, has set up again. The base has 3wks down and 2wks up but the largest down week showed strong support at the 10wk line and finished in the top of it’s range. The RS line has turned up and the RS rating is 92. 10 so far. EARNINGS: annual earnings are estimated to rise 12% this year (-.25) The EPS growth rate is 12% (-.15) and the earnings stability rating is 46 (-.2) but the ROE is strong at 35%. Quarterly EPS and Sales are strong and have accelerated the past several quarters (+.5) 9.9 so far. GROUP: currently ranked 54 (-.25) brings us to 9.65 OWNERSHIP: fund ownership has risen each quarter since inception. There are 2 top funds in MX and management holds 3% of shares. OVERALL: 9.65
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| 3 | 9.25 | OCN | Ocwen Financial Corp | 04-29-2013 |
BASE/CHART: Since breaking out of a 3rd stage (-.25) cup w/ handle 7wks ago, OCN tested the 10wk line and continues to close above it. The base is 14wks long, 21% deep, & has about a 10% handle. The pivot is $39.25. There are 5wks up vs 9wks down (-.25) But there are 3wks of significant accumulation in the base (up on strong vol) vs no signs of strong distribution in the base. There is a 3wks tight formed at the bottom of the base, also a good sign. The RS line is flattening since Oct but the RS rating is still very strong at 97 9.5 so far. EARNINGS: annual earnings are estimated to rise 247% this year. The EPS growth rate, earnings stability rating, and ROE have improved but are all still below the levels I like to see (-.45) Quarterly sales are very strong and quarterly EPS is strong and accelerated (+.5) 9.55 so far. GROUP: currently ranked 44 (-.25) 9.3 so far OWNERSHIP: fund ownership has risen steadily for 7 straight quarters. Management holds 20% of shares but there are no top funds in OCN (-.05) OVERALL: 9.25
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| 4 | 8.95 | SODA | Sodastream Intl Ltd | 05-09-2013 |
BASE/CHART: SODA appears to be forming a 2nd stage double bottom that is 7wks long, 16% deep, and has a $52.67 pivot. There are 3wks down and 4wks up so far. The down week of 2/1 closed in middle of range and the down week of 2/22 closed near 10wk line. The RS line needs to strengthen prior to breakout and the RS rating is 81. 10 so far. EARNINGS: annual earnings are estimated to rise 8% this year (-.25). The EPS growth rate is great at 158% but the earnings stability rating is poor at 75 (-.2) and the ROE is just below the 17% I look for (currently 15%) (-.1) Quarterly earnings and sales, however, are both well above the 25% min I look for. 9.45 so far. GROUP: currently ranked 23 OWNERSHIP: fund ownership has been inconsistent and actually declined last quarter (-.5) Mgt holds 7% of shares and there are 2 top funds in SODA. OVERALL: 8.95
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| 5 | 8.9 | RYL | Ryland Group | 04-25-2013 |
BASE/CHART: RYL appears to be working on a 3rd stage (-.25) cup that is 7wks long, 22% deep, and has a $43 pivot. There are 4wks up vs 3wks down. There is strong accumulation on the right side of the base. The RS line is rising and the RS rating is 95. 9.75 so far. EARNINGS: annual earnings are estimated to rise 88% this year. Since RYL is a turnaround with several years of negative earnings, the EPS growth rated and earnings stability are N/A. The ROE, however, is only 12% (-.1) Quarterly EPS is every strong and quarterly sales have accelerated (+.25) 9.9 so far. GROUP: currently ranked 76 (-.5) takes us down to 9.4 OWNERSHIP: fund ownership declined last quarter (-.5). Mgt holds 6% of shares and there are 2 top funds in RYL. OVERALL: 8.9
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| 6 | 8.9 | LEN | Lennar Corp Cl A | 03-20-2013 |
BASE/CHART: LEN has formed a 4th stage (-.5) cup that is 7wks long, 15% deep and has a $43.22 pivot. There are 3wks down and 4wks up so far. Volume has been slightly higher to the upside but declining as it moves up the right side of the base. The RS line is trending higher and the RS rating is 87. 9.5 so far. EARNINGS: annual earnings are estimated to rise 52% this year. Since LEN is still a turnaround story with several years of negative earnings, the EPS growth rate and earnings stability are n/a. The ROE is only 8% (-.1). Quarterly EPS and sales are strong. 9.4 so far. GROUP: currently ranked 76 (-.5) takes us down to 8.9 OWNERSHIP: fund ownership has risen for 6 straight quarters. There are 5 top funds in LEN and mgt holds 4% of shares. OVERALL: 8.9
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| 7 | 8.85 | NSR | Neustar Inc | 04-26-2013 |
BASE/CHART: NSR is presently working on a 1st stage flat base that is 5wks long, 10% deep and has a $47.24 pivot. There are 4wks down and 1wk up (-.25). Throughout the base NSR has managed to find support near the 10wk line. The RS line is trending up though needs work prior to breakout and the RS rating is 77. 9.75 so far. EARNINGS: annual earnings are estimated to rise 10% this year (-.25). The EPS growth rate is 18% (I look for 25% or greater) (-.15) but the ROE is strong at 36% and the earnings stability rating is good at 10. Quarterly EPS and sales are strong. 9.35 so far. GROUP: currently ranked 28 OWNERSHIP: fund ownership decelerated slightly in the most recent quarter (-.5). There is 1 top fund in NSR and mgt holds 2% of shares. OVERALL: 8.85
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| 8 | 8.85 | JAZZ | Jazz Pharmaceuticals Plc | 05-08-2013 |
BASE/CHART: JAZZ formed a 1st stage cup w/ handle that is 18wks long, 21% deep w/ 4% handle. The pivot is at $57.99 pivot. There are only 7 up weeks vs 11 down weeks (-.25) but there are 8 weeks above the 10wk line. Support seems to have come in consistently along the 40wk line. The RS line which was previously very erratic appears to be stabilizing. The RS rating is 79 which is low for a b/o (-.1). Also notable is the 3wks tight in the handle 9.65 so far. EARNINGS: annual earnings are estimated to rise 21% this year (-.25) The EPS growth rate is 123%, the earnings stability rating is 26, and the ROE is 44% which are all outstanding. Quarterly EPS and sales are very strong as well. 9.4 so far. GROUP: currently ranked 72 (-.5) 8.9 so far. OWNERSHIP: fund ownership has risen for 7 straight quarters. Management holds 16% of shares but there are no top funds presently in JAZZ (-.05) OVERALL: 8.85
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| 9 | 8.45 | DORM | Dorman Products Inc | 04-29-2013 |
BASE/CHART: right off the bat (-.25) for being very thinly traded at only 281k 50day avg vol. (I prefer 400k min) DORM attempted to break out of a 2nd stage flat base & tripped the 8% sell rule. It has set up again. The base is 5wks long, 9% deep and has a $37.19 pivot. There are 2 up weeks and 3 down weeks but DORM has held the 10wk line throughout the base and even held close to it after the b/o failed. The highest weekly vol in the base was a down week that finished in the upper middle of it’s range. Additionally, most weeks in the base finished near the top of the range so I’ll give it a pass. The RS line is trending higher and the RS rating is 92. 9.75 so far. EARNINGS: annual earnings are estimated to rise 20% this year (-.25) The EPS growth rate, ROE and earnings stability ratings are all very strong. Quarterly EPS and sales both slowed in the most recent quarter (-.5) 9 so far. GROUP: currently ranked 70 (-.5) 8.5 so far OWNERSHIP: fund ownership has risen 6 straight quarters. Mgt holds 21% of shares but there are no top funds in DORM (-.05) OVERALL: 8.45
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| 10 | 8.3 | INGR | Ingredion Inc | 05-01-2013 |
BASE/CHART: INGR is working on a 2nd stage cup w/ handle that is 8wks long, 11% deep, w/ a 6% handle. There are 3wks down and 5wks up. There is tightness in the and this past week showed strong support near the 10wk line. However, handles should form in low volume (-.5) The RS line is turning up but the RS rating is only 74. This needs to improve prior to breaking out. 9.5 so far. EARNINGS: annual earnings are estimated to rise 5% this year (-.25) The EPS growth rate is 16% (-.15), the earings stability rating is 23, and the ROE is 19% which is strong. Quarterly EPS is strong but quarterly sales are well below the 25% I look for (-.25) 8.85 so far. GROUP: currently 47 (-.25) takes us down to 8.6 OWNERSHIP: fund ownership has risen the past 2 quarters but has been inconsistent over the past 2 years (-.25) Management holds 1% of shares and there are no top fudns in INGR (-.05) OVERALL: 8.3
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None of these stocks or ratings should be misconstrued as recommendations to buy, sell, or hold. They are presented here for educational and demonstrative purposes only. All ratings are based on my Stock Evaluation Guide and the charts/data provided by MarketSmith.