The week ended on a positive note with the Dow Jones falling 0.20%, the S&P 500 gaining 0.28% and NASDAQ jumping 1.10%. The MCSI Emerging Markets Index dipped by a hairsbreadth, dropping 0.19%.
Big gainers in your Bull Market Alert portfolio included Sociedad Química y Minera de Chile S.A. (SQM), which jumped 8.28% and The TJX Companies, Inc. (TJX), which gained 3.80%.
With your Sociedad Química y Minera de Chile S.A. (SQM) July $22.50 call options (SQM160715C00022500) trading at $1.71, sell half of your options here to book a 100% gain. Hold on to the rest as we have some time to go before these options expire.
Avista Corporation (AVA) dropped below its 50-day moving average and is now a Hold.
With the S&P 500 trading at levels it first reached in June of 2014, this is very much a stock picker’s market.
Choppy markets mean we need to dig deep to find individual stocks that have the potential to outperform a trading-bound market.
This week’s Bull Market Alert recommendation, Dycom Industries, Inc. (DY), is just such a “sleeper stock.”
Founded in 1969 and based in Palm Beach Gardens, Florida, Dycom is a telecom contractor that installs and maintains fiber, copper and coaxial cables to a wide range of telecommunications providers.
Dycom’s business is in a very good place. With the expansion of consumer-oriented services like Netflix and the “Internet of everything,” demand for improved broadband services is soaring. Telecom networks are investing constantly to keep up with demand and Dycom’s installation business is booming. Reports from the company suggest that Dycom has more work than it can handle.
Signaling management’s collective confidence in the company, Dycom is actively repurchasing its own shares. Dycom recently announced a second $100 million share buyback program. During its first $100 million effort, Dycom repurchased 1.6 million shares over the course of the third quarter at an average price of $64.21 a share.
Dycom is also among the favorite holdings of the smart money on Wall Street. I’ve uncovered that at least 14 of the major hedge funds hold a stake in Dycom. In addition, nine growth-oriented, small-cap strategies I also track are holding Dycom as well.
So buy Dycom Industries, Inc. (DY) at market today and place your stop at $59.50. Hold off on recommending any related call options, since the bid-ask spreads on these is just too high.
Portfolio Update
iShares MSCI Emerging Markets (EEM) closed the week nearly flat. Although EEM has been trading just under its 200-day moving average (MA) over the past three weeks, the $32 price level slightly below its moving average stands as strong support. EEM also has a very long history of significant support at the $37 level. Since breaching this level last August, EEM has just recently completed an important technical pattern that suggests higher prices could be right ahead. EEM is a HOLD.
The TJX Companies, Inc. (TJX) gained 3.80%, despite its wild price swings last week. TJX reported earnings on May 17, returning earnings per share (EPS) of $0.76 cents, up from EPS of $0.69 year-over-year. Revenue rose 9.9%, hitting $7.54 billion to beat analysts’ expectations of $7.29 billion. Sales rose 7%, trouncing the expected 2%-3% figure. Despite spiking above the 50-day MA one day last week, TJX is a HOLD.
Sociedad Química y Minera de Chile S.A. (SQM) jumped 8.28%, last week after reporting earnings on May 18. Earnings came in at $0.22 per ADR, down from $0.27 per ADR year-over-year. Revenues were $391.8 million, up from $387.5 million year-over-year. Goldman Sachs also published a recent article forecasting the lithium market to triple by 2025, even without factoring in the current relentless rise in lithium demand for consumer applications. SQM is a BUY.
Avista Corporation (AVA) fell 2.54% for its first week in the portfolio. AVA’s board of directors declared a quarterly dividend of $0.3425 per share recently. This common stock dividend is payable June 15 to shareholders of record at the close of trading on May 26. AVA moved to a HOLD.
