PremierInvestor.net Newsletter Wednesday 07-18-2001 section 1 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/3030_1.asp ================================================================= In section one: Market Wrap: A Penny For Your Thoughts Market Sentiment: Win, Place, or Show Play-of-the-Day: Cerus Corporation - CERS Watch List: Something For Everyone! ----------------------------------------------------------------- U.S. Market Numbers ----------------------------------------------------------------- MARKET WRAP (view in courier font for table alignment) ----------------------------------------------------------------- 07-18-2001 High Low Volume Advance/Decline DJIA 10569.83 - 36.56 10594.54 10480.88 1.03 bln 1326/1760 NASDAQ 2016.17 - 51.15 2056.06 2003.95 1.48 bln 1381/2347 S&P 100 623.06 - 3.85 629.91 617.40 totals 2707/4107 S&P 500 1207.71 - 6.73 1214.44 1198.33 RUS 2000 483.62 - 6.95 490.57 483.62 DJ TRANS 2976.32 - 30.76 3003.97 2953.00 VIX 26.31 + 0.95 26.94 25.89 Put/Call Ratio 0.71 ----------------------------------------------------------------- =========== Market Wrap =========== A Penny For Your Thoughts If it's not one thing it's another. While everyone is worried about the economy slowing and corporate earnings, the "worry of the day" was in the currency markets and potential ramifications of a weakening U.S. dollar. What got things off to a shaky start for stocks was this morning's economic data that had the Consumer Price Index "CPI" showing prices at the consumer level rising by 0.2% and the core rate (excluding food and energy) rising a surprising 0.3%. Economists had expected the CPI to rise by 0.1% and the core rate to only rise 0.2%. Both numbers gave hint of some inflation occurring at the consumer level. While today's CPI numbers don't look to be all that inflationary, what really had market participants worried is the decline taking place in the U.S. dollar. Inflation is a tricky little indicator that has many variables. One variable that has been favorable on the inflation front is the effect of a strong U.S. dollar. U.S. consumers have been enjoying its purchasing power in recent months and its strength has been giving the effect of lower prices for foreign made products and services. Here's what we're looking at as it relates to the U.S. dollar versus the British pound. British Pound futures for Sept. 2001 - last 10 months The chart for the British Pound Sep. 2001 futures (eu01u) shows that the U.S. dollar is beginning to weaken versus the British pound. In simplistic terms, if a US consumer was paying $1.51 for a candy bar that a British candy bar manufacturer was wanted 1 British pound for back in January, the US consumer only had to pay $1.36 for that same 1 British pound candy bar in early June. But today, the price of that candy bar has risen to $1.41! Now, while this can be perceived as "bad news" as it appears inflationary, here's what the market is going to struggle with. Remember how we've been noticing the deep cyclicals and the Morgan Stanley Cyclical Index (CYC.X) showing a strong chart in recent days? Guess who the companies are in the United States that sell a lot of their products overseas? Now put yourself in the shoes of the CEO of a U.S. multinational company that sells its products in Britain. Aha! Now the tables have turned haven't they? In January the US$ was weak versus the pound and your British customers could afford to buy lots of product from you. Since that time however, the British pound was weakening and they probably started canceling some orders with you. Ouch! That hurts both the top line (revenue) and the bottom line (earnings). The only way you could turn a profit was to lay off some employees as your foreign customers were canceling orders! Ouch! That could hurt the economy as the unemployment lines grow in the United States. Now, back to that strong chart we've been seeing in the deep cyclicals. Could it be that "smart money" saw all this coming back in October of last year and started buying the deep cyclicals well in advance of weakening US dollar that would help alleviate some pressure on the deep cyclicals? The big question now is this. If the market is making a bet that the U.S. dollar will weaken further against foreign currencies, will the potential positive effect for the deep cyclicals actually occur? Remember, those foreign consumers must still have to be willing to buy the products that are produced by U.S. companies doing business there. That is why I've been stressing that we need to monitor the cyclicals so closely. You can bet we'll be monitoring these things in coming sessions very closely. If any subscribers have questions regarding this, let me know. I'm also going to be pulling in some things we saw in the Gold/Silver Index (XAU.X) today. Remember... gold is perceived as a hedge against inflation! ================ Market Sentiment ================ Win, Place, or Show by Jeffery Canavan I believe Alan Greenspan sums up the current market sentiment. "The period of sub par economic growth...is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated." Technically the trend for most sectors is down, but as Al says, "The rate of deterioration is clearly slowing." I don't know if I would say the decline in stocks is clearly slowing, but as long as support levels continue to hold, bulls can be optimistic. One blow to bullish optimism today was the flight to bonds. With the hint of more rate cuts, investors scooped on bonds, and sent yields below some key support levels. It also made bank and gold stocks the smart bet today. Some of the buying in gold can be attributed to a pending strike in South Africa, but nevertheless, gold won the horse race today, up 3.74%. Drugs and healthcare stocks placed (came in second for those of you who don't bet on horses), gaining over 3% today. Retail and chemical stocks showed, while semiconductors and networking brought up the rear. Internet and software stocks pulled up lame, and couldn't even finish the race. According to their trainer, they were down over 6% due to a bad case of earnings. Ebay only had symptoms of bad earnings, dropping 96 cents today, and we won't know the full prognosis until the results are back from the lab tomorrow after the bell. Earnings continue to be the focus, and if I could fly to Vegas and place a bet, I would only bet on technology to show - meet earnings but lower guidance. What horse is going to win the next furlong? Tough call, but odds favor a mudder, a horse that runs well in poor conditions, like say cyclicals. If you bet on a horse, that's gambling. If you bet you can make three spades, that's entertainment. If you bet cotton will go up three points, that's business. See the difference? -Blackie Sherrod *************************Sector Watch**************************** Weekly Daily Overbought Support Resistance Trend Trend Oversold DJIA Bearish Bearish Overbought 10,200 10,600 NASD Bearish Bearish Overbought 1,940 2,125 S&P 500 Bearish Bearish Overbought 1,170 1,240 Rus 2000 Neutral Neutral Overbought 465 500 Semis Bearish Bearish Overbought 525 585 Biotech Bearish Bearish Oversold 490 550 Internet Neutral Bearish Overbought 160 186 Networking Bearish Bearish Overbought 300 365 Software Bearish Bearish Overbought 188 210 Banking Neutral Bullish Overbought 625 670 Retail Neutral Bullish Overbought 850 900 Drugs Bearish Neutral Neutral 385 410 Percent Change Last Last Last Relative Strength 5 Days 10 Days 30 Days vs S&P 500 DJIA - - - Positive NASD 2.2% (5.8%) (9.7%) Neutral S&P 500 2.3% (2.2%) (5.9%) N/A Rus 2000 1.6% (2.7%) (6.4%) Neutral Semis 0.8% (12.0%) (13.2%) Negative Biotech (1.1%) (13.9%) (22.8%) Negative Internet 0.3% (11.8%) (26.8%) Neutral Networking 2.7% (11.6%) (28.1%) Neutral Software (1.5%) (13.3%) (17.7%) Negative Banking 4.3% 0.5% (1.0%) Positive Retail 7.7% 3.6% 0.0% Positive Drugs 3.7% 2.9% (4.3%) Neutral ***************************************************************** ========================= Play-of-the-Day (Bullish) ========================= Cerus Corporation - CERS Close:$71.31 Change:+0.96 Stop:$67.50 Original Comments When Selected on July 13th: Company Description: Cerus develops blood-pathogen inactivation systems intended to purify donated blood and improve the safety of blood transfusions. The company has just completed Phase III clinical trails for its Intercept Platelet blood system, which uses proprietary small- molecule compounds to prevent pathogens, including HIV, hepatitis B and C viruses, and other bacteria and viruses, from replicating in blood products. The firm is also researching technology for use in bone-marrow transplants. It has collaboration agreements with Baxter Healthcare Corporation (Baxter), the Pharmaceutical Division of Kirin Brewery Co., Ltd. (Kirin) and the Consortium for Plasma Science (the Consortium). Cerus has not received any revenue from product sales, and all revenue recognized by the Company to date has resulted from the agreements with Baxter and the Consortium and federal research grants. Fundamentals: Last year the firm lost $2.73 per share. In the current fiscal year, analysts expect the firm to lose $3.04 per share and $2.15 in 2002. Why We Like It: Cerus is the typical research development story. It has deep losses and a deep pipeline with several key products working towards final approvals in the US and Europe. Its stock performance also tells a promising story. The recent weakness in drug and biotech shares has not had a big effect on CERS. After driving from a low of $32.25 on April 4th to $76 on June 6th, the shares began trading in a range bounded by approximately $65.75 and $76. After twice attempting to best $76 the shares dropped to the lower range. The third time may be the charm as the shares are yet once more bouncing off the lower trading range. If history is being repeated the shares are gearing up for another run at $76. Each time an important level of resistance is tested it weakens, perhaps this is the time for a breakthrough. In any event, even a failed test of $76 would put a 10-percent gain on the table with prospects for more. Support exists at the before mentioned $65.75. We will institute a $65.00 stop. Updated Comments: The last two trading sessions have been painful for the general market, but they were pure pleasure for CERS shares. After dropping $3.40 on Monday, a Bullish reversal set in and the shares gained $4.50 on Tuesday and 96-cents on Wednesday. This last gain pushed the shares above resistance at $70 and coupled with a nice spike in volume, suggests the stock is poised for a leg up. The next area of significant resistance is still at $76. For those considering taking a position in this play watch for a positive move to provide further confirmation of the Bullish momentum. We are going to snug up our stop to $67.50. Picked on July 13th at $69.25 Gain Since Picked +2.06 Earnings Date 7/24(Not Confirmed) ========== Watch List ========== Loews Corp. - LTR - close: 59.32 change: +2.78 WHY WE LIKE IT: Many people don't know that Loews is a holding company with a number of different focuses. LTR owns 87% of CNA Financial (NYSE:CNA), 100% of Lorillard, a cigarette manufacturer, 100% of Loews Hotels, 53% of Diamond Offshore Drilling (NYSE: DO), and 97% of Bulova Corp, the watch maker. With so many revenue streams one might expect LTR to be somewhat protected from a market downturn. Not true. The stock has been in a steady down trend since its mid-May highs near $72. So why do we like it? It looks like shares of LTR may have hit bottom. POTENTIAL TRIGGER EVENT: The stock saw almost a 5% bounce today after wonderful reversal in yesterday's trading. If you enjoy use retracement patterns, one can use the bottom back in January and the top in May to show that Tuesday's bottom was a perfect bounce off its 61.8% retracement level (a Fibonacci number popular with fans of technical analysis). The volume today and yesterday was significantly above average and investors are not expecting an earnings announcement from LTR until the 1st week of August. Whether you believe in Fibonacci numbers or not we are going to set our potential trigger to evaluate a long play at $60. If LTR can close over $60 on good volume we may have a winner. --- Sony Corp. - SNE - close: 56.74 change: -1.56 WHY WE LIKE IT: One of the most well known Japanese conglomerates, Sony has its hands in everything. Electronic equipment, musical instruments, computer hardware, video games systems, are just a few of the products Sony produces on top of their on recording label and a sizeable movie production unit. While this list of Sony ventures is not complete you should be familiar with the name. What do we like about Sony? Bulls should look the other way as SNE is not looking that strong right now. The stock has been in a steady decline since late May. The slippery slope got a lot steeper in early July when Sony announced they would be forced to recall some of their phone handsets with a potential cost of $161 million. This expense was not going to bode well for the April-June quarter. POTENTIAL TRIGGER EVENT: The company is fast approaching its earnings announcement on July 26th. Shares have found some measure of support at the $56 level but after a brief bounce it is struggling to maintain its health. Our potential trigger to evaluate a short play would be a close under $56. Please be aware that as an ADR the stock constantly gaps up or down based on how the parent stock trades in Japan. This means that the earnings announcement will likely be announced before the U.S. market opens on the 26th. Trade accordingly. --- Americredit Corp. - ACF - close: 60.25 change: +0.05 WHY WE LIKE IT: More than doubling since the first of the year, investors should be pretty happy with ACF. Prone to significant two or three week retracements, buyers have taken these opportunities to pick up shares of ACF at easy to identify levels of support. We recently displayed ACF on the Watch List back on July 13th. Since then shares have been consolidating near $60 as we discussed last Friday. The apparent strength in the stock is encouraging but a the volume on the stock is a big red flag in our book! POTENTIAL TRIGGER EVENT: Odds are good that ACF will break out again soon the question is whether it will be up or down. The bias looks to be up. As we mentioned last week the stock could consolidate back to $55 but the bulls are maintaining a strong hold of the stock and a recent dip only fell as low as 58.80. Earnings are not expected until August 7th so investors still have plenty of time to move in (or out) of the security before- hand. Closing above $60 today is exactly what we would have wanted but the declining volume is the wildcard. Aggressive traders could jump on this one now but we would recommend a tight stop. If shares continue upward tomorrow we might see this on the play list soon. ------------------------- -- Continuing to Watch -- ------------------------- Some stocks on the Watch List will be carried over from one day to the next if they continue to show potential but have not yet breached the trigger point. Some stocks have met our conditions for a trigger point but other factors hold us back from making it a full-time stock pick. ------------------------- Procter & Gamble - PG - close: 69.20 change: -0.35 Still need to see a close over $70. Below is the original write up from July 17th: WHY WE LIKE IT: A.G. Lafley, president of PG, probably hoped it was a positive analyst meeting. A month ago, Lafley told analysts that he was confident that PG would meet its commitments and do what it needed to grow in the future. Investors might have panicked when word got out that the restructuring charge was to exceed $1.2 billion in the fourth quarter thus forcing PG to expect a loss. Shares fell sharply on June 15th but quickly found a bottom near $62 the next day. Once investors and analysts had time to digest the Fiscal 2002 Outlook and Growth plan that Lafley discussed their fears appeared to be eased. Buyers have been steadily eating up the stock and the gains are accelerating. POTENTIAL TRIGGER EVENT: Shares of PG spent two or three days fighting with its 200-dma but Tuesday marks the second day in a row that it has closed above it. Mild support should be found in the 68.00 - 69.00 area. Our potential trigger would be a close over $70. Earnings are not expected until August 7th and the next level of steep resistance is not until $76. --- Taro Pharmaceucticals - TARO - close: 90.09 change: +5.59 TARO is up 6.6% since we watch listed the stock yesterday. For many traders the move from $77 to $90 in two days should cause one to hesitate before placing any new bullish bets on the stock. We are keeping TARO on the watch list even though it has satisfied our trigger with a close over $90. The rocket- like moves make the stock appear way over bought and we would not recommend a bullish position until the stock has had time to digest these gains. Look for some consolidation over the next couple of days and then maybe we'll get an entry point before the last few days ahead of its earnings/split date. Below is the original write up from July 17th: WHY WE LIKE IT: TARO is another returning stock from the July 11th Watch List. Overall TARO investors have plenty to be thankful for as the stock is up big over the last several months. Shares saw a big move today as fellow drug companies PFE and JNJ both announced earnings with rising profits for the quarter. Currently, TARO has a 2:1 stock split payable on July 26th, which just so happens to be the same day they are expected to announce earnings. This double- whammy could continue to spur excite for investors up to the 26th. POTENTIAL TRIGGER EVENT: Ultimate resistance is at $90 where the stock finally ran out of steam near the end of June. Since then shares have pulled back to establish new support at $75 and $80. It has also developed another level of resistance that can produce a short-term trigger for active traders. If shares close over $85 there is a good chance the stock will continue to appreciate to $90. More conservative traders could wait for a close over $90, trading the $5 appreciation for a more defined breakout. Whatever you do, we still recommend caution over the July 26th earnings and 2:1 split payable date. The stock could be victim of a "sell the news" affect. --- Quaker Oats Co. - OAT - close: 87.79 change: -0.80 OAT has fulfilled our conditions for a potential short play. We are leaving it on the watch list because of the risk associated with holding over an earnings report. The earnings are expected tomorrow before the market opens. Active traders might have an opportunity tomorrow if the report surprises one way or the other. There is probably a lack of any bullish expectation for the earnings report so if OAT truly surprises to the upside with a positive conference call then shares could catch the bears unaware. Below is the original write up from July 17th: WHY WE LIKE IT: Who doesn't like hominy grits, cornmeal, and hot cereal? Well, okay, we're not big on grits but folks in the South say they're not bad. Evidently, investors don't appear to "hot" on Quaker Oats lately. Considering that they are in a very competitive packaged food industry its no wonder that investors and fund managers were bullish when PepsiCo offer a $13 billion merger with Quaker. Unfortunately for investors, the FTC has delayed the deal that was expected to close back on June 30th, 2001. The latest news shows that the FTC is likely to have PepsiCo divest its All Sport drink line before they acquire Quaker's Gatorade division. POTENTIAL TRIGGER EVENT: About half of Quaker's revenues come from their cereal division who's growth rate has almost come to a complete halt. Earnings are expected on July 19th and if the company reports negatively then shares could fall despite the deal with PepsiCo. Speaking of which, the longer this merger is delayed the more nervous investors are going to get. This is one time where an aggressive investor might consider holding a position over earnings but since we are discussing a short play (and your risk is technically infinite) we'd advise against it and wait for the report on the July 19th. A close below $88 would be the trigger point. ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Wednesday 07-18-2001 section 2 of 2 Copyright © 2001, All rights reserved. Redistribution in any form is strictly prohibited. The entire newsletter is best viewed in COURIER 10 for alignment ================================================================= To view this email newsletter in HTML format with imbedded charts and graphs, click here: http://www.PremierInvestor.net/htmlemail/3030_2.asp ================================================================= In section two: Split Trader Split Announcements: WTSLA, FFIC, KMP New Plays: No new ST play Play Updates: Updates to stops Closed Plays: No closed ST plays Net Bulls New Play: Check Point Software - CHKP (Bearish) Play Updates: Updates to stops Closed Plays: Borland Software - BORL Stock Bottom / Active Trader New Play: Professional Detailing - PDII (Bearish) Play Updates: Updates to stops Closed Plays: No closed SB plays ================================================================= Split Trader (ST) section ================================================================== =================== Split Announcements =================== Splitting The Wet Seal Before today's opening bell, teen apparel retailer The Wet Seal Inc. (Nasdaq:WTSLA) announced that shareholders have approved a proposal to increase the number of authorized common shares. This motion opened the doors to the expected 3-for-2 stock split announcement by the Board of Directors today. Dividends of one additional share for every two owned will be payable on July 24, 2001. The stock will trade on a split- adjusted basis on July 25, and at that time there will be approximately 22 million shares outstanding and 14 million in the float. The number of authorized shares is now 60 million. WTSLA was on the Split Trader Expected list in anticipation of today's announcement. When the Board filed a proxy with the SEC on June 11 for last Friday's shareholder meeting, they stated that the sole purpose of increasing the authorized shares was to implement a 3:2 stock split. Wet Seal shares traded as high as $24.17 on Wednesday, with average volume of 289,900. Recent trading is at $23.86. About the Company: The Wet Seal, Inc., a specialty retailer of fashionable and contemporary apparel and accessory items, is headquartered in Foothill Ranch, California. The Company currently operates a total of 558 stores in 43 states, the District of Columbia and Puerto Rico, of which 363 are Wet Seal stores and 94 are Contempo Casuals stores which cater to the junior customer, 83 are Arden B. stores which focus on a fashionable, sophisticated, contemporary customer and 18 are Zutopia stores. === Flushing Approves Stock Split, Delivers Positive Earnings Flushing Financial Corporation (Nasdaq: FFIC) announced before the opening bell today that the Board of Directors approved a 3- for-2 stock split, payable in the form of a 50 percent dividend. The payable date is set for August 30 at which time eligible shareholders will receive one additional share for every two shares owned. Flushing currently has 9.2 million shares outstanding, a float of 5.1 million, and 20 million shares authorized for issuance. This marks the second split announced since the Company's IPO in 1995. Following the split announcement, FFIC announced record Q2 earnings results. Net income was $3.6 million, or 43 cents a share, up from $3.2 million, or 38 cents a share in the comparable period a year ago. FFIC shares closed at $24.30 on Tuesday, just off the 52-week high of $24.80. Volume on the 3-month average is 26 thousand. About the Company: Flushing Financial Corporation is the holding company for Flushing Savings Bank, FSB, a federally chartered stock savings bank insured by the FDIC. The Bank conducts its business through ten banking offices located in Queens, Brooklyn, Manhattan, Bronx, and Nassau County. === Kinder Morgan Sets Stock Split on Results of Record Q2 Following Wednesday's closing bell, Kinder Morgan Energy Partners, L.P. (NYSE:KMP) declared a 2-for-1 stock split on its common stock, payable August 31, 2001. The decision was partially based on strong earnings results for its second quarter, which reportedly met estimates with net income of $104.2 million, or $0.72 per share, versus $71.8 million, or $0.70 per share for the year-ago period. This marks the second stock split announced for KMP since it began trading publicly in 1997. It will effectively increase the number of outstanding shares to 130 million on the execution date of September 2, 2001. The Company also declared a quarterly cash dividend of $1.05 per share payable on August 14, 2001 to shareholders of record as of July 31, 2001. This marks a 24 percent increase from the $0.85 dividend of the second quarter of 2000. Kinder Morgan has executed several acquisitions and developments during the past quarter. The most recent project on the board is the purchase of a 2,600-mile Texas pipeline from an affiliate of Occidental Petroleum for $360 million. KMP shares are coming off 52-week highs of $73.99, closing down -1.04 on the day to $70.30. About the Company: Kinder Morgan Energy Partners, L. P. is the nation's largest pipeline master limited partnership with an enterprise value of approximately $8 billion. It owns and operates one of the largest product pipeline and terminal systems in the country. In addition, it is a major transporter of natural gas, operating more than 10,000 miles of pipeline; is the nation's leading provider of CO2 for use in enhanced oil recovery projects; and is one of the largest operators of bulk terminals, with over 30 facilities that transload more than 50 million tons of coal, petroleum coke and other products annually. The general partner of KMP is owned by Kinder Morgan, Inc., one of the largest midstream energy companies in America, operating more than 30,000 miles of natural gas and product pipelines. KMI also has significant retail distribution, electric generation and terminal assets. Combined, the two companies have an enterprise value of more than $17 billion. (press release) =============== ST Play Updates =============== ----------------------- Split Candidate Updates ----------------------- Stops Changed: Alliant Techsystems (ATK) from $90.00 o $91.00 Cerus Corporation (CERS) from $65.00 to $67.50 NVR, Inc. (NVR) from $157.00 to $164.00 ================================================================== Net Bulls (NB) section ================================================================== ============ NB New Plays ============ --------------- New Bearish Play --------------- Check Point Software - CHKP Close:$40.09 Change:-3.81 Stop:$44.50 Company Description: The Israeli-based company makes firewalls that form a kind of electronic moat around networks protecting them from hackers and viruses. Its FireWall-1 product protects networks from unauthorized access and security threats while its VPN-1 software sets up virtual private networks for secure internal and remote communications. The company sells its products through resellers, manufacturers and systems integrators such as IBM and EDS. Competitors include RSA Security, Symantec and Internet Security Group. Fundamentals: At its second-quarter earnings announcement on July 23rd, analysts expect the company to earn 32-cents per share on revenue of $150 million. In the same period a year ago the company earned 17-cents per shares on revenue of $91 million. For the year, analysts forecast the company will earn $1.28 per share on sales of $630 million. Last year, the company earned 84-cents per share on revenue of $425 million. The company has an estimated forward 2001 P/E of 31. The industry average P/E is 45. Why We Like It: Once the beneficiary of investors confidence in its predominate position in the recession resistant security sector, it is now being hammered as investors have realized no place is safe from corporate budget cutters. The shares have been sliced almost in half from its $80.16 high from April 19th. The catalysts have been a string of earning warnings and anemic reports from Checkpoint and its rivals. Checkpoint warned in early July that revenue, although sharply higher than last year, would be would be slightly below expectations. Late-Wednesday, competitor Internet Security Group followed through on its warnings when it reported a second-quarter loss. With the complete absence of good industry news there is also an absence of a catalyst for a bullish reversal. This means CHKP shares should remain weak at least through to its earnings report. By the end of Wednesday's trading, Checkpoint shares close of $40.09 left it staring off the edge of a precipice. Once through the $39.50 session low of last April 3rd and the $38.65 session low of April 4, 2000 there is little support until $30.00. Rising bearish sentiment is clearly in evidence. This is shown by the lack of resistance on the part of bulls during Wednesday's trading session and a spike in volume from 6 million on Tuesday to 9.5 million on Wednesday. We will set our initial stop on this Bearish selection to just above recent session highs at $44.50. Picked on July 18th at $40.09 Earnings Date 7/23 (Not Confirmed) =============== NB Play Updates =============== ----------------------- NB Bearish Play Update ----------------------- Changed stop for Brocade (BRCD) from $39.00 to $34.00 =============== NB Closed Plays =============== ----------------- Closed Long Plays ----------------- Borland Software - BORL Close:$14.97 Change:-1.13 S Stop:$15.40 The Bullish outlook for these shares changed abruptly with Microsoft's latest salvo in its ongoing war against Sun Microsystems over the computer desktop. Microsoft made a surprise announcement that it was dropping support for the popular Java programming language in its new Windows XP operating system. Although other attempts by Microsoft to squash Java have failed, as a developer of Java programming tools Borland shares took a hit. We closed this play when it hit our stop of $15.50 leaving us with a slight 58-cent per share loss. Picked on July 13th at $15.98 Gain since picked: -0.58 Earnings Date: 7/24 (not confirmed) ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ============ AT New Plays ============ --------------- New Short Plays --------------- Professional Detailing - PDII Close:$70.00 Change:-3.31 Stop:$74.25 Company Description: Professional Detailing, Inc. provides customized product detailing programs and other marketing and promotional services to the United States pharmaceutical industry. For the 3 months ended 3/31/01, revenues totaled $173.1M, up from $71.3M. Net income rose 95% to $10.9M. Revenues reflect the recording of product sales of Ceftin for the first time. Earnings were partially offset by higher facilities expansion and field selling expenses. Fundamentals: For the 2001 fiscal year the company's net income is expected to increase 22-percent. Analysts project company earnings to rise from $2.40 in 2001 to $3.14 in 2002. This gives PDII shares a low current P/E of 29 and a forward 2001 P/E of 22. Why We Like It: PDII reached a high of $90.00 at the end of July. Since then, however, the stock has fallen lock, step, and barrel with the Pharmaceutical industry that it serves. Today's drop below support at $72.00 looks as if it might be indicative of further declines in the stock. Technical indicators show minor support around $65.00 and more substantive support at the $60.00 level, but today's strong downside volume suggests that the current climate is far from positive. Closing at a critical support level tonight ($70.00 a share), we think that a concerted drop under $70.00, coupled with requisite conviction in the form of solid volume could lead to further declines in the stock. If this pattern takes shape tomorrow, look for shares to test support at $65.00 in the short-term, with $60.00 the next likely level to be tested. The Pharmaceutical sector has been punished over the last month, however, there could be more downside on the horizon before things pick up. Picked on July 18th at $70.00 Earnings Date N/A (Not Confirmed) =============== AT Play Updates =============== ----------------- Long Play Updates ----------------- Changed Stops: Laboratory Corporation of America (LH) from $79.25 to $82.00. Tenet Healthcare (THC) from $52.50 to $53.75. ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright © 2001 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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