Tuesday, February 7, 2012

LINTA: Fingers in many pies

Liberty Interactive Corp. (LINTA)  is a holding company with fingers in a number of media pies. It has significant interest, not always controlling, in such companies as AOL, Backcountry.com, Bodybuilding.com, Expedia, QVC, HSN, Time Warner Cable and TripAdvisor.

The Englewood, Colorado company had the most bullish chart of 25 stocks added today to the Zacks top-buy list. 

LINTA has been on a choppy upswing from $12.44 on Aug. 9, 2011. The most recent leg up began Jan. 25 at $16.44, and has carried the price up to a higher high today of $18.24. 

The price is approaching a resistance level at $18.65 set on May 10, 2011, only 2.2% away. There's not much room to make money before that level is tested.

This is not a chart to love. None of the 25 Zacks picks that I screened today were. When you're looking at the pick of the litter, the litter's quality counts. The litter had no happily wagging tails.

(My essay "10,000 Charts" sets out my screening technique.)

One thing to really hate about LINTA is the volume on the daily chart, which has set a series of lower peaks since mid-December 2011. That shows waning interest.

One thing to really love is that it has set a higher high three days after a 2.9% opening gap last Friday, Feb. 3. That shows real momentum to the upside.

LINTA has return on equity of 10% -- not growth-stock territory but respectable -- and a debt/equity ratio of 0.93, much higher than I normally like. The institutions love LINTA -- they own 96% of the shares -- yet the price is near parity with sales. It takes only $1.14 in stock to control a dollar's worth of sales.

The options selection is fairly broad, with 17 puts and 17 calls for March. However, only two of those options have open interest, one with 21 contracts and another with 48. Even though the bid-ask spreads are decent, that's not enough options liquidity to meet my standards.

The shares, however, are liquid, with 3.8 million traded daily on average, and so shares would be my vehicle of choice.

Earnings will be announced Feb. 23 before the market opens.

Decision for my account: I'm passing on LINTA at this point. The potential profit between current levels and resistance is too small. A decisive break above $18.65 would prompt me to revisit the decision. 

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.

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