A “3D” Bet on Profits

Nicholas Vardy

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

The big news in your Bull Market Alert portfolio continues to be European banks, with the National Bank of Greece (NBG) soaring 27.56% this past week alone and Bank of Ireland (IRE) jumping another 8.23%. I always expected moves in European banks to be swift and “option-like.” However, NBG and IRE advances of 63.64% and 45.75%, respectively, since the start of the year have surprised even me.

Last week’s pick, Life Technologies (LIFE), also got off to a strong start with a gain of 7.01%. And don’t forget, you booked a gain of 93.94% in LIFE options on Friday in just four days.

This week’s Bull Market Alert pick, Stratasys, Inc. (SSYS), is a Minneapolis-based maker of additive manufacturing machines for prototyping and producing plastic parts, as well as a market leader in the red-hot “3D printing” space.

If you’re like me, it’s hard to get your head around what exactly “3D printing” is. But it’s actually pretty much what it sounds like. Design a part on your computer using some type of three-dimensional software and the “printer” actually manufactures it for you right then and there. Stratasys’ Fused Deposition Modeling manufacturing technology actually builds the designed parts layer-by-layer, from the bottom up.

The advantages of this process are remarkable. Called Direct Digital Manufacturing (DDM), the process reduces both the cost and lead time of production tooling or machining. The process also eliminates machining or tooling costs for manufacturing tools or low-volume production parts. In addition, it allows the creation of custom plastic parts that match original design or design changes in just a few hours. It further allows the production of new models in just a few hours, shaving weeks — sometimes months — off of plastic part production.

Stratasys is the market leader in this exciting new space, boasting a 41% market share in 2010. And it’s a fast-growing market as well, with Stratasys’ last three quarters of recorded EPS hitting an average of 70%. The company will release financial results for Q4 on Tuesday, February 7, 2012. If the company does as well with its fourth quarter and full year results as it has in the last three quarters, you can expect a nice pop in the stock.

So buy Stratasys, Inc. (SSYS) at market today, and place your stop at $29.50. If you want to bet big on the upcoming earnings announcement, try the March $40 calls (SSYS120317C00040000).

Here’s a word of warning. Stratasys, Inc. is a volatile, microcap stock and one that is prone to wild swings, both because of its size and its sector. So, you may want to take a smaller position than usual.

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Portfolio Update

Alexion Pharmaceuticals (ALXN) rose 2.47% last week. Oppenheimer raised its ALXN price target by $9 to $84, citing increased optimism for a new therapy named “asfotase alfa (ENB-0040).” Alexion obtained the “asfotase alfa (ENB-0040)” therapy via its recent Enobia acquisition. Alexion reports earnings on Feb 9 and has a history of surprising to the upside. ALXN is a BUY.

Bank of Ireland (IRE) linked a third week of big gains, rising another 8.23%. Continued positive news regarding a Greek debt deal propelled IRE higher last week. IRE’s recent gains have been swift, and the stock is now slightly overbought, breaking through the 100-day moving average on Thursday. However, if positive European news continues, IRE may continue its ascension without a significant pullback. IRE is a BUY.

National Bank of Greece SA (NBG) followed last week’s huge pop and added another 27.56% gain. Greek bankers’ nationalization fears eased last week as “the troika” — comprised of the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission — observed that “Greek banks should maintain their private status, even after receiving money from the government.” NBG is a BUY.

Companhia de Bebidas Das Americas (ABV) came in flat last week, dipping 0.46%. ABV is trading sideways after hitting a new 52-week high. AmBev has a positive rating from 67% of the nine analysts who cover it. Expect another week or two weeks of “consolidation” in ABV’s stock price as investors jockey their positions. ABV reports earnings March 1. ABV is a BUY.

ProShares Ultra S&P500 (SSO) was flat for the week, moving up just 0.33% with the S&P 500 (SPX) rising just 0.07% last week. Although SSO is a “2x the S&P500” exchange-traded fund, you managed to make far more than double the SPX last week through SSO. SSO is a BUY.

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MasterCard Inc. (MA) rose 2.39% over the past five trading days. The Green Dot Corporation is launching a new program in February 2012 to utilize MasterCard as the official benefit delivery solution for 40 million strong AARP members. This program should yield a large bump in MasterCard transactions. MA is a HOLD.

Ford Motor Co. (F) dipped 3.02% last week after delivering an earnings report that was below expectations. Ford reported an adjusted net income of $0.20/share, which was $0.05 below estimates. Although American sales were strong, overseas operations were challenging. Overall, leading analysts expect automotive sales margins will be up year-over-year in 2012, so this sector is a good one for investors. F remains well above its 50-day moving average and appears to be forming support at its (higher) 200-day moving average. F is a BUY.

Intuitive Surgical, Inc. (ISRG) rose 2.99%. A week has passed since ISRG’s quarterly results failed to impress investors, but many now are viewing the recent pullback as an excellent buying opportunity. ISRG now is trading 20% below the price targets set by 18 analysts, who are encouraging investors to add positions here and become increasingly aggressive on pullbacks. ISRG is a BUY.

Melco Crown (MPEL) continued its recent bull run, adding another 4.83%. MPEL shares gapped up nicely off of the 200-day moving average on Thursday and are nearing a three-month high. This positive move follows comments from analyst group Union Gaming Group LLC that Macau revenues may break records this month. MPEL reports earnings on Feb 21. MPEL is a BUY.

Life Technologies (LIFE) earned its new place in your portfolio last week, jumping 7.01%. You also took a 93.94% gains in this option in just four days. Competitor Illumina Inc. is the target of a hostile takeover by Swiss drug giant Roche Holding AG. Roche offered a premium bid of $44.50/share for Illumina — 18% above the target company’s share price at the time of the offer. This move is causing the rising tide that lifts all boats. LIFE reports earnings on Feb 7. LIFE is a BUY

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It hasn't been a stellar week for the U.S. stock market...
 
But that's not the case for this week's Bull Market Alert pick, Life Technologies Corporation (LIFE), whose May $50 call options that I recommended on Monday ALREADY have soared 93.94%.
 
With the market due for a pullback, sell half of your options here to lock in some of these remarkable short-terms gains.
 
Hold on to the re

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