It was a broadly flat week for markets, with the Dow Jones up 0.33%, the S&P 500 down 0.15% and the NASDAQ falling 0.97%. The MCSI Emerging Markets Index fell 1.03%.
On June 9, you were stopped out of Sociedad Química y Minera de Chile S.A. (SQM) for an 18.16% gain.
On June 7, you sold your remaining SQM July $22.50 call options (SQM160715C00022500) to lock in 161% gains.
On June 8, you booked 68% gains in your iShares MSCI Emerging Markets (EEM) July $33.00 call options (EEM160715C00033000).
Big gainers in your Bull Market Alert portfolio included Allete, Inc. (ALE), which moved 3.03% higher, and Avista Corporation (AVA), which gained 1.85%.
Three positions — Healthcare Services Group, Inc. (HCSG), Avista Corporation (AVA) and Allete, Inc. (ALE) — all hit new 52-week highs.
Both the iShares MSCI Emerging Markets (EEM) and iShares MSCI Ireland Capped (EIRL) fell below their 50-day moving averages and moved to a HOLD.
In contrast, The TJX Companies, Inc. (TJX) moved back to a BUY.
Finally, I am also recommending that you raise your stop in Dycom Industries, Inc. (DY) to $82.30 to lock in at least a 15% gain in the stock.
This week’s Bull Market Alert once again digs deep into the U.S. small-cap space with Drew Industries Incorporated (DW). As I have noted in recent weeks, small caps offer the kind of profitable rifle-shot opportunities we want in a U.S. stock market that has not budged in the last 12 months.
Founded in 1962, and based in Elkhart, Indiana, Drew manufactures and supplies components to the manufacturers of recreational vehicles (RVs) and manufactured homes in the United States. The stock has been on a tear in 2016, soaring 29.74% since the start of the year.
Here’s why I expect Drew Industries to continue its strong run.
First, despite its stodgy image, RVs are a growth industry. With the baby-boom generation retiring, the market for recreational vehicles is skyrocketing. And with Drew focusing on making parts for the RV market, an ever larger percentage of each RV sold in the United States is a Drew product.
Second, Drew’s acquisition spree of 10 companies since 2014 has set a strong foundation for boosting revenues and profits in the future. Among Drew’s recent buys were a European company producing bed lifts and retractable RV steps, as well as an Indiana-based marine-furniture specialist. By diversifying both geographically and into other RV-related parts manufacturing, Drew Industries is set to profit for years to come.
Third, Drew is delivering spectacularly in terms of its recent financial results. In Drew’s most recent quarter, revenue was up 17% to $423 million, easily topping expectations of 11%. Net income soared by almost 80% to $20.1 million. Earnings of $1.45 per share clobbered consensus forecasts by a whopping $0.42 per share.
Finally, if you invest in Drew you’ll have plenty of company. No fewer than 10 small-cap growth and low volatility strategies I track closely invest in the company as well.
So buy Drew Industries Incorporated (DW) at market today, and set your stop at a wide $66.00.
If you want to play the options, I recommend the October $75 calls (DW161021C00075000), which last traded at $7.00 and expires on Oct. 21. The bid-ask spread for these options is rather wide, so this option bet carries more risk than usual.
Portfolio Update
iShares MSCI Emerging Markets (EEM) moved 1.03% lower last week. EEM started last week off on a strong note by extending its recent run, only to peak mid-week and pull back. With global markets starting this morning off down significantly, EEM may be affected as well. EEM ended last week down just below its 50-day moving average (MA) and is now a HOLD.
iShares MSCI Ireland Capped (EIRL) fell 3.18%. EIRL traded in a similar pattern to global market indexes last week, falling quickly as the week came to a close. EIRL also moved to a HOLD last week.
The TJX Companies, Inc. (TJX) gained 0.71% last week. TJX Companies announced a quarterly stock dividend on Wednesday last week of $0.26 per share. This dividend will be paid on Sept. 1 to shareholders of record on Aug. 11. TJX rose above its 50-day MA to become a BUY.
Dycom Industries, Inc. (DY) gained 1.09% over the past five trading days. DY came very close to its 52-week high last week — a high set back on the day before last Thanksgiving. A report came out on Saturday listing eight analysts covering Dycom at a “Buy,” one at a “Hold” and none at “Sell.” This puts the consensus rating at 89% positive. Low price targets come in at $87 with high targets at $95 and $100. Raise your stop to $82.30 to lock in at least a 15% gain in the stock.
DY is a BUY.
Allete, Inc. (ALE) moved 3.03% higher. ALE is the latest addition to the portfolio and another winner from the 52-week high list. Last week denotes ALE’s third winning week in a row. Allete takes in $1.25 for every $1.00 it spends as an expense, and yields $1.27 as operating profit. Trailing 12-month earnings are rising as recent 12-month net income was $147 million compared to a 12.12% leap from last period’s $131 million measure. ALE is a BUY.
Sincerely,
Nicholas A. Vardy
