U.S. markets were mixed last week. The S&P 500 edged up 0.1%, while the Dow lost 0.4%. Both indexes were fighting back from sizable losses suffered earlier in the week. Your Bull Market Alert portfolio was broadly flat, as well, though you were stopped out of your positions in Stratasys, Inc. (SSYS) and SPDR S&P BRIC 40 (BIK) for slight losses. In fact, they were your first losses of the year. Otherwise, six of your current Bull Market Alert recommendations are showing double-digit percentage gains, with Alexion Pharmaceuticals (ALXN), Melco Crown (MPEL) and AmBev (ABV) ahead 25.92%, 22.48% and 21.37%, respectively.
I also want to highlight two points here:
1) Ford (F) March $12.00 call options. You sold half of your options on Jan. 23 for 61.2% gains. Your remaining options have crawled back into positive territory and are up 3.39%. With the options expiring on March 16, sell your leftover Ford options here to make sure you at least break even on your remaining options.
2) Intuitive Surgical (ISRG) April $470 call options. You already took 59.39% gains on half of your options on Feb. 15. Your remaining ISRG options are now up 84.39%. That situation means they are very near triple-digit percentage gains — potentially marking your fifth for 2012. So, keep your eye out for a Special Alert over the coming days.
Turning to this week’s recommendation…
Growing up in my hometown of Pittsburgh, I’ve heard the name of this week’s Bull Market Alert pick, Dick’s Sporting Goods (DKS), for many years. But I was never aware of the inspiring story behind its start until now.
In 1948, 18-year-old Dick Stack was an energetic salesman at a small Army and Navy store in Binghamton, New York. One day, the store owner asked Dick, an avid fisherman, if it would be a good idea to sell fishing gear in his shop. Dick offered to develop a plan. His boss told him that he didn’t know what he was doing and “would never make a good merchant.”
That evening, frustrated and dejected, Dick retreated to his grandmother’s home. She listened quietly as he recounted his story. When he had finished, she rose silently and went to the kitchen. Removing the lid from her cookie jar, she took $300 of her hard-earned savings and gave it to him. “Dick, always follow your dreams,” she advised.
With his grandmother’s $300, Dick opened a modest bait and tackle shop in Binghamton. By 1958, he expanded his product line to include much of what you’ll find at Dick’s Sporting Goods today. Eventually, he moved the company to Pittsburgh, and today Dick’s is the largest publicly traded sporting goods chain in the United States. The company operates a total of 561 Dick’s Sporting Goods and Golf Galaxy stores.
Dick’s current Chief Executive Edward Stack expects the company to continue its steady expansion as Americans adopt healthier lifestyles, including increased exercise. Six new Dick’s Sporting Goods stores are opening this quarter. The same number opened in the fourth quarter. That expansion would bring the total to 486 Dick’s Sporting Goods stores nationwide, as well as 81 Golf Galaxy shops.
Dick’s recent earnings have belied the signs of any economic slowdown. Earnings per share (EPS) climbed to 88 cents a share, 16% higher vs. the same quarter a year ago. Revenue rose 6% in the quarter to $1.6 billion. Dick’s also issued its first dividend ever in the fourth quarter, and announced a 12-month share repurchase program.
Management forecasts continued strong growth in 2012, expecting first-quarter EPS of 36-38 cents, a 23% hike from the 30-cent-a-share profit it posted a year earlier, and a penny above analysts’ consensus.
So buy
Dick’s Sporting Goods (DKS) at market today, and place your stop at $42.00. For potentially even bigger gains, I recommend the June $48 call options
(DKS120616C00048000).
Portfolio Update
Alexion Pharmaceuticals (ALXN) came in nearly flat for the week. The New England Journal of Medicine published a report on Phase 2 testing of ALXN’s new drug, “asfotase alfa.” This breakthrough drug treats a rare condition known as hypophosphatasia (HPP). The test data revealed that 90% of the test patients showed “substantial skeletal healing” after 24 months of use. That’s good news for ALXN, which remains a BUY.
Bank of Ireland (IRE) lost 1.11% last week. Irish bailout lenders are examining a deal that will end payments on 31 billion euro in promissory notes, and put a more cost-effective long-term debt solution in place. As of Sunday, the European Union (EU), International Monetary Fund (IMF) and European Central Bank (ECB) were in “broad agreement” on methods to move the process forward. IRE is a BUY.
National Bank of Greece SA (NBG) gained 0.93% over the week. The International Swaps and Derivatives Association (ISDA) declared Friday that Greece had experienced a “credit event.” This situation means insurers of Greek debt must pay to cover Greek credit default swap contracts. Already priced into the market, this event had little effect on the market’s mood. NBG is a BUY.
Companhia de Bebidas Das Americas (ABV) added 2.91%. Investors liked what they saw in AmBev’s Thursday earnings report and took the stock to a new 52-week high. ABV reported fourth quarter net sales increased to 11.6%. This put AmBev’s year-end 2011 net sales at 9.9%. ABV remains a BUY.
MasterCard Inc. (MA) rose 1.63%. The Asian middle class’s use of credit cards is rising along with their wealth, according to MasterCard Inc.’s CFO Martina Hund-Mejean. MA shares are up 9.5% this year. Among 36 analysts covering MA, 26 of them give the stock a “buy” or “strong buy” rating. MA is a BUY.
Ford Motor Co. (F) lost 1.10% last week. The U.S. auto industry rebound continued into 2012 with Ford gaining more than 10% this year. F remains a BUY.
Intuitive Surgical, Inc. (ISRG) added 1.34% over the past five trading days. Goldman Sachs increased its earnings-per-share estimate for ISRG last Friday and raised its price target to $567 — 7% higher than its current price. ISRG is a BUY.
Melco Crown (MPEL) gave back 1.94% after last week’s big gain. Gaming stocks have outperformed the broader markets due to continued growth in Macau and the ongoing recovery on the Las Vegas Strip. MPEL remains a BUY.
Life Technologies (LIFE) fell 2.10% over the past five trading days. Moody’s Investors Service raised LIFE’s rating to “investment-grade,” based upon its plan to reduce debt and its historical performance. Ending the week just $0.02 below the 50-day moving average, LIFE is now a HOLD.
Altisource Portfolio Solutions (ASPS) was flat for the week, losing 0.25%. Lenders One Mortgage Cooperative, a large subsidiary of ASPS, announced a record $100 billion in loan originations for 2011 — an 18% increase over 2010. ASPS is a BUY.
Monster Beverage Corp. (MNST) gained 1.67% for its first week in your portfolio. MNST had some monster news last Tuesday as Goldman Sachs reiterated it’s “buy” rating for the stock and raised its price target to $70. That’s 15% above its current level. MNST is a BUY.
P.S. Please join me for the
Las Vegas Money Show, May 14-17, at Caesar’s Palace. To register, call 1-800/970-4355 and mention priority code 026655 or go to
NicholasVardy.lasvegasmoneyshow.com. I also encourage you to sign up for my
hedge fund seminar, Wednesday, May 16, 9 a.m. – 11 a.m.