The markets endured a negative holiday-shortened week, with the Dow Jones tumbling 1.21%, the S&P 500 dropping 0.88% and the NASDAQ falling 0.38%. The MCSI Emerging Markets Index suffered the most, ending the week down a substantial 3.79%.
One stock that bucked the negative trend was Ambarella Inc. (AMBA), which jumped 7.80%. It also hit a new 52-week high alongside the iShares MSCI Hong Kong (EWH).
You were stopped out of Integrated Device Technology (IDTI) on May 26 with a 15.07% gain.
The WisdomTree Europe Hedged Equity Fund (HEDJ) fell below its 50-day moving average and moved to a HOLD.
With the overall U.S. market delivering less-than-spectacular results this year, 2015 is all about picking the right stock in the right sector. One of those sectors is technology, and this week’s Bull Market Alert recommendation — Taiwan-based Silicon Motion Technology (SIMO) — fits into that profile.
Silicon Motion Technology builds microcontroller circuits for flash storage devices and specialty RF (radio frequency) wireless chips. The stock has had a strong run and is already up almost 50% this year.
Here’s why I expect it to continue its bull run in the coming months.
First, the company is accelerating its earnings growth by leaps and bounds. In the past four quarters, its earnings per share (EPS) has risen by 52%, 78%, 77% and 153%. That latest increase was the biggest in nearly four years. And over the past 30 days, the consensus estimate for its full-year earnings has increased from $1.64 per share to $1.75 per share today.
Second, after a tough 2013, revenue is growing again. This is thanks to the company’s continued efforts at product innovation and cutting more deals to supply non-iOS smartphones. As a result, Silicon Motion is projected to see sales growth this year of 33.34%, a rate higher than the industry average of 21.97%.
Finally, SIMO is back on investors’ screens. The stock popped last Wednesday, rising $2.66, or 8.4%, to $34.38, breaking out of a long-time trading range on the best volume in a couple of months. With this kind of momentum, I think the stock can hit the low $40s in the next six weeks.
So buy Silicon Motion Technology (SIMO) at market today and place your stop at $28.75. I am going to wait to recommend options on this one until the stock settles down, as the options are currently overvalued.
Halyard Health Inc. (HYH) dipped 0.81% over the four-day Memorial Day trading week. This play on the medical technology sector is currently undervalued, according to several measures. Selling over recent weeks has left the stock quite oversold and has pushed the stock price very near its recent spin-off price, making it ripe for a bounce. HYH is also very undervalued from a sector comparison standpoint. Analysts’ firms have price targets set between $44 and $53, with an average price target of $48.50. HYH is a HOLD.
iShares MSCI Hong Kong (EWH) gave back 3.43% last week. EWH began the week at a new 52-week high but fell on significant weakness in the Chinese markets. The Shanghai Composite pulled back considerably last week, pulling related markets down with it in the region. EWH is a BUY.
WisdomTree Europe Hedged Equity Fund (HEDJ) fell 2.24%. Although HEDJ remained relatively flat for most of the week, Friday’s trading day encompassed most of the week’s losses. However, the story of a recovering Europe has not changed and is one that will unfold for quite some time to come. HEDJ dipped below the 50-day moving average (MA) to become a HOLD.
Regeneron (REGN) closed the prior week at a 52-week high and traded sideways all last week despite a negative overall market. Regeneron is on track to receive Food & Drug Administration (FDA) approval for a strong new cholesterol drug that can sharply lower LDL (low-density lipoprotein) cholesterol in high-risk patients. Approval will likely be granted this summer, allowing this new offering to become another income stream to REGN’s bottom line. REGN is a BUY.
Ambarella Inc. (AMBA) jumped 7.80% last week to hit a new 52-week high. AMBA is poised to report earnings on Tuesday after markets close — and positive convictions appear to run strong, based upon AMBA’s recent run higher. Several positive reports were posted last week to create even more of a fire under this stock. Pacific Crest raised its price target to $96 on Tuesday, as did KeyBanc Capital Markets. Barrington Research pushed its target to $97, while Stifel Nicolaus moved its target on AMBA upwards to $99. And, Jim Cramer chimed in on Friday by remarking on Ambarella’s “genius” business moves within their industry. AMBA is a BUY.
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