Booking Two Double-Digit Gains — and a Bet on U.S. Retail

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Overall, it was a flat week in the markets with all the major averages ending the week within 1% of where they started. The Dow Jones was up 0.36% and the S&P 500 rose 0.43%. The MSCI Emerging Markets Index (MCSI) eked out a 0.26% gain.
 
3D Systems Corp. (DDD) was the top performer of the week with the stock rising 5.75%. Your were stopped out of several of your volatile positions after booking big gains in Monster Beverages (MNST) — a 12.53% gain, and Pharmacyclics (PCYC) — for a 21.92% profit. Recall that you’ve already booked triple-digit profits on the options I recommended on these positions. We weren’t so lucky with Mellanox (MLNX) which hit its stop price right before its earnings announcement last week, and right before the stock soared. But if you haven’t sold your stocks and options yet, I recommend you do so now to lock in some big gains.
 
With Standard Pacific Corp. (SPF) pulling back slightly last week, I am recommending you buy the December $7.00 call options (SPF121222C00007000) ahead of the company’s earnings announcement on Thursday of this week.
 
After enduring some gut-wrenching volatility in your recent Bull Market Alert picks, this week’s recommendation Ross Stores Inc. (ROST) — is in the positively staid sector of U.S discount retailers. 
 
Most retailers in the U.S. aren’t doing great, with retail taking an unexpected 0.5% fall in May and June. Yet this is the environment where discount retailers like Ross — with its focus on bargains on name-brand merchandise — tend to do best.
 
While other retailers floundered in June, Ross reported a 7% rise in same-store sales and a 12% revenue increase in the same month. For Q1, Ross reported sales growth of 14%, with earnings per share soaring 26%. When the Ross announces Q2 earnings on Aug 16, it expects earnings to come in at 77 cents or 78 cents a share, up 20% to 22%, compared with previous expectations of 72 cents to 75 cents a share. For the remainder of 2012, analysts expect Ross to increase revenues by over 11% and show earnings growth of over 19%.
 
And the news about Ross gets better the farther out you look. Ross currently runs 1,146 total stores in the U.S. But its current plans call for more than doubling its current size to 2,000 Ross locations and 500 dd’s Discounts locations. 
 
Ross’ shareholder friendly management is also aggressively repurchasing shares. In the first quarter alone the company repurchased 2 million shares at a total cost of $111 million at an average price of $55.50 per share. That’s $12 cheaper than the stock’s current level. Based on its publicly disclosed plans, you can expect the company to purchase another $300 million before the end of the year. All this maximizes earnings per share for investors.
 
So buy Ross Stores Inc. (ROST) at market today, and place your stop at $59.00. For potentially bigger gains, I recommend the November $67.50 options (ROST121117C00067500).

Portfolio Update

Bank of Ireland (IRE) fell 5.71% over the past five trading days. “Green shoots” continued to appear in the Irish banking system as international investors snapped up three-month T-Bill’s at a recent National Treasury Management Agency (NTMA) auction. This level of demand illustrates the positive change in investor attitude towards Irish debt — a major supporting factor in Ireland’s financial recovery. IRE is scheduled to report earnings on Aug 10 and is a HOLD.
 
National Bank of Greece SA (NBG) dipped 1.29%. The 50-day moving average is now just four cents above NGB’s major $1.50 support level. These lines will likely join forces soon and give NBG a solid platform to gain upon. Founded in 1841, NBG is no stranger to weathering struggles, and remains the largest bank in Greece. Just one cent below its 50-day moving average, NBG is a HOLD.
 
Novo Nordisk A/S (NVO) remained flat last week. The U. S. Food and Drug Administration (FDA) announced Wednesday the postponement of a decision, until Nov 2012, on NVO’s applications for new drugs “insulin degludec” and “insulin degludec with insulin aspart”. These drugs work with insulin to regulate the absorption rate and insulin levels in the bloodstream. NVO will report earnings on Aug 9 and is a BUY.
 
3D Systems Corp. (DDD) gained 5.75% for the week. The Cube® home 3D printer made Stuff Magazine’s “2012 Cool List” recently. Stuff Magazine had this to say about the Cube®, “Just as Apple blew minds by introducing the concept of a ‘home’ PC in 1976, so it could be for the Cube and 3D printing. It’s not the world’s first 3D printer, but it is the first to tempt our inner mad scientist, with a (relatively) low price tag and user-friendly touch screen.” DDD is scheduled to report earnings on July 26 and is a BUY.
 
Standard Pacific Corp. (SPF) lost 3.24%. The National Association of Home Builders said Tuesday that its confidence index recently jumped more in July than it has in the past ten years. The Commerce department echoed the good news, reporting a June rise in home building to the highest level in four years. SPF is scheduled to report earnings on July 26. SPF is a BUY.
 
Questcor Pharmaceutical (QCOR) gained back 2.30% last week after difficult start in your portfolio — no thanks to rogue analyst firm Citron. However, QCOR’s recent price action is encouraging, as it appears a stabilizing sideways trend is developing. A “Buy” may be just around the corner, and might yield a swift rebound gain. QCOR is schedule to report earnings on July 24 and is a HOLD.
 

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