Global stock markets had one of their strongest weeks in recent memory, with the Dow Jones up 3.15%, the S&P 500 rising 3.22% and the NASDAQ soaring 3.28%. The MCSI Emerging Markets Index (EEM) also rocketed 6.28%.
What a difference a week makes. After $3 trillion being wiped off the value of markets in the two days following the Brexit vote on June 23, markets bounced back remarkably quickly.
All of your holdings in your Bull Market Alert portfolio showed strong gains last week, with even the weakest among the bunch, Spire, Inc. (SR), showing a 2.41% rise. iShares MSCI Emerging Markets (EEM) was the top performer of the week, jumping 6.28% with all other positions notching gains between 3% and 6%. No fewer than five positions hit new 52-week highs: Healthcare Services Group, Inc. (HCSG), Avista Corporation (AVA), Allete, Inc. (ALE), Drew Industries Incorporated (DW) and Spire, Inc. (SR).
With your Drew Industries Incorporated (DW) October $75 calls (DW161021C00075000) up 74%, sell half of your options to lock in these solid, double-digit percentage gains.
You were, however, stopped out of the iShares MSCI Ireland Capped (EIRL) at a loss before the market rebound.
The iShares MSCI Emerging Markets (EEM) and The TJX Companies, Inc. (TJX) both moved back above their 50-day moving average. Both positions are now a “Buy.”
It is rare that I recommend that you re-enter a position you have held before.
This week’s Bull Market Alert recommendation, Dycom Industries, Inc. (DY), is one of those exceptions.
Recall, that you were stopped out of this stock on June 13 for a solid 15.01% gain in less than three weeks.
This week, I am recommending that you repurchase the stock.
Here’s a review of the investment case for Dycom Industries.
Recall that Dycom, of Palm Beach Gardens, Florida, is a telecom contractor that installs and maintains fiber, copper and coaxial cables to a wide range of telecommunications providers.
Dycom’s business is benefiting from a massive industry upgrade. With the expansion of consumer-oriented services like Netflix and the “Internet of everything,” demand for improved broadband services is soaring. Specifically, Dycom’s management expects that the combination of surging demand for one gigabit deployments from several large customers, huge investments in wireline networks and the ongoing Connect America Fund II project will ensure the company’s growth for years to come. With an order backlog of $5.64 billion equaling two full years of sales, Dycom already has more work than it can handle.
No wonder the company’s earnings are booming. The company clobbered estimates in three out of the last four quarters with an average earnings surprise of 19.6%. For the most recent quarter, the company reported earnings per share of $1.08 in the quarter, crushing the consensus estimate of 75 cents by 44%. With earnings expected to grow by 33% over the coming year, Dycom Industries is growing 50% faster than the overall industry.
As a further boost to its stock price, Dycom is actively repurchasing its own shares. At the quarter ending in January, Dycom had repurchased around 1.56 million shares for $100 million, reducing shares outstanding by 4.7%. In addition, the company authorized the repurchase of up to an additional $100 million of shares over the next 17 months.
Finally, Dycom is also among the favorite holdings of the smart money on Wall Street. Ten 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 $74.00. I am holding off on recommending any related call options, since the bid-ask spreads are still just too high.
Portfolio Update
iShares MSCI Emerging Markets (EEM) jumped 6.28%. Markets shook off the shock of Brexit last week to make a resounding comeback — and in short order as well. This premier emerging markets exchange-traded fund (ETF) is now back to its pre-Brexit level, and looking to challenge the $35 price level for the third time in less than one month. EEM moved back above its 50-day moving average (MA) and is now a BUY.
The TJX Companies, Inc. (TJX) gained back 3.08% last week, moving above its 50-day MA once again. Financial firm BMO Capital Markets reaffirmed its “Outperform” rating on TJX last week. BMO predicts that any Brexit-induced downturn could be a net-positive as shoppers seek value purchases from this retailer. The firm also commented on a belief that TJX will report solid second-quarter results with an estimated earnings per share (EPS) of $0.83 — two cents above the $0.81 consensus estimate. TJX is a BUY.
Healthcare Services Group, Inc. (HCSG) bounced back on strength last week, rising 3.25% to hit a new 52-week high. HCSG closed last Thursday and Friday with strong trading days that both ended at daily highs. This stock is up nearly 10% in your portfolio, and appears primed to continue gains after breaking through resistance at the $40 price level. HCSG will report earnings on July 12, after markets close, with consensus estimates at $0.27 EPS on revenue of $392.09 million. HCSG is a BUY.
Avista Corporation (AVA) added 4.53%. Avista’s trading followed in HCSG’s footsteps last week, moving upwards on momentum and hitting a new 52-week high. AVA is another winner in your portfolio seemingly bound to break the 10% gain mark this coming trading week. AVA is a BUY.
Allete, Inc. (ALE) moved 4.52% higher. At the risk of sounding redundant, ALE also turned out a strong winning week, hitting a new 52-week high. KeyBanc released a report last Saturday indicating Brexit developments should hold the tone of the Federal Reserve in a dovish stance. They believe this could push ALE and other defensive utility-sector holdings to outperform the broader markets. KeyBanc also maintained its “Overweight” rating for ALE. ALE is a BUY.
Sincerely,
Nicholas A. Vardy
