Tuesday, January 31, 2012

BDC: Cable guys

Belden Inc. (BDC) of St. Louis, Missouri makes cables and related products for networking. Everyone is either building a network or expanding their present network, so it's stock with a good story.

The chart is less than awesome. It began its present rise in early October 2011, at $23.24, peaking lat Friday, Jan. 27, at $40.45. The rise was interrupted by a lengthy sideways contraction that lasted all of autumn and into winter.

BDC was the most bullish chart among 31 stocks added to Zacks top buys today. The Zacks method is based primarily on analyst opinion. See my essay "10,000 Charts" for a description of my chart screening process.

Longer term, BDC is a stock that has gone nowhere for more than 15 years, zigging and zagging between around $60 to around $10. There's a lot of money to be made in zags and zigs of that magnitude -- don't get me wrong. But BDC is not a shoot-for-the-moon play.

The price is at a resistance level, set in February 2011 and needs to beat $40.41 to count as a breakout. Beyond that there is resistance at $42.97 set in June 2008, and once that is past, it is clear sailing up to the July 2007 peak of $60.

The financials, by contarst, look pretty good. The return on equity is 15%, and the debt equity ratio is 0.78 -- higher than I like but not awful.

Institutional ownership is listed as 103%. I'm not sure how that's possible, but it means that the big players love Belden. And the price is reasonably cheap. It takes only 94 cents in stock to buy $1 worth of sales.

Belden is a moderately liquid stock, with average volume of 220,000 shares a day. That, however, has not translated into a great selection of options. There are only eight February strike prices available, and the most open interest on any strike is 16 contracts. The bid/ask spread is abysmal: $2.90/$6.80 for the at the money February call, for example.

BDC announces earnings before the open on Feb. 9. The company pays a small dividend, yielding 0.51% annually, with the next ex-dividend date due sometime in March.

Decision for my account: I would consider a bull play upon a decisive breakout above the $40.41 level, and even more on a breakout above $42.97. But I would want to see some movement before committing my funds. The lack of decent options is a barrier, because it makes it impossible to enjoy the leverage that options provide. So even with a breakout, the options situation might well be a deal-killer.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

No comments:

Post a Comment