Betting on a Bounce in Gentherm (THRM)

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was another solid week for global stock markets last week, with the Dow Jones up 0.64% and S&P 500 rising 1.07%. The MCSI Emerging Markets Index took a breather and was down 0.30%.

Big gainers in your Bull Market Alert portfolio included Jazz Pharmaceuticals (JAZZ), jumping 2.40%; Celgene Corporation (CELG), up 2.37%; Bank of Ireland (IRE), rising 1.81%; and WellPoint, Inc. (WLP), climbing 1.52%.

You were stopped out of a long-time position in Delphi (DLPH) on July 30 at $54.80 for a 30.48% gain. You sold your remaining options at a 99.60% gain.

You were also stopped out of Sony (SNE) on July 29 at $21 for a 3.81% gain.

All of your other positions remain a “Buy.”

This week’s Bull Market Alert recommendation — Gentherm (THRM) — is a maker of climate control systems for automobiles.

That puts it in the same space as your previously successful recommendation in Delphi (DLPH).

An unwarranted sell-off in the stock last week offers you an opportunity to profit from a nice short-term bounce.

On Aug. 1, Gentherm reported its 2Q financial results. For the quarter ended June 30, revenue rose 17.88% to $160.5 million from the year-earlier quarter. That was above views for $149.9 million on high volumes and handily beat expectations. But thanks to several one-time events, the company’s quarterly earnings fell short of expectations by eight cents.

As a result, the company’s share price tumbled 8.43% to $18.68.

Yet the short-term hiccup belies a long-term positive outlook for the company.

As the CEO put it, “We had record revenues in this year’s second quarter and first six months thanks to the contributions of all our business units around the world.” Even in Europe, revenue rose 16%, despite continued economic weakness in the region.

The bottom line? The short-term pullback in the stock price was an overreaction to what remains a very positive outlook for the company. I expect the stock price to bounce and resume its upward trend accordingly.

So buy Gentherm (THRM) at market today, and place your stop at $16.00. I am holding off on recommending options on this one until the stock settles down.

Portfolio Update

Bank of Ireland (IRE) gained 1.81% last week. Bank of Ireland reported good news in its earnings report last Friday, signaling its continuing recovery. IRE’s first-half loss narrowed to $603 million, down from the previous year’s $1.46 billion figure. Chief Executive Richie Boucher commented that IRE had “normalized the situation” and was “close to profitability.” IRE is a BUY.

Jazz Pharmaceuticals (JAZZ) rose 2.40%, hitting another new 52-week high early in the week. JAZZ continued to rise ahead of its earnings report, due on Tuesday after markets close. Analysts’ estimates are $1.52 earnings per share on $208.7 million in revenue. JAZZ is a BUY.

ProShares Ultra Gold (UGL) lost 3.76% over the past five trading days. UGL continued to drift sideways on lackluster news out of the Federal Reserve. Fed Chairman Ben Bernanke stated that the outlook would remain “business as usual” for the near term, holding gold bulls at bay last week. UGL is trading just under its 50-day moving average, but remains a BUY.

WellPoint, Inc. (WLP) gained 1.52%. Credit Suisse recently raised its price target for WLP from $77 to $92 — 7% above from Friday’s close. Credit Suisse cited WLP’s positive guidance through 2014 as one catalyst for an upwards move in the stock price. WLP is a BUY.

Celgene Corporation (CELG) gained 2.37% and hit a new 52-week high for its opening week in your Bull Market Alert portfolio. CELG recently announced pricing on three series of unsecured notes totaling $1.5 billion. Celgene intends to use the cash it raises for further research & development of clinical products, share repurchasing and repayment of commercial paper. CELG is a BUY.

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