Friday, March 16, 2012

ADS and THO: One more time

Two stocks from February are back in my view: ADS and THO.

Alliance Data Systems Corp. (ADS) runs connection tools for retailers -- private-label credit cards, loyalty cards and non-spam email marketing.

Thor Industries Inc. (THO) makes recreational vehicles. (Although the company name is worthy of an Ayn Rand novel -- how could she have skipped mighty Thor after making so much of shrugging Atlas?)

When I last wrote about Alliance on Feb. 8, I said the chart was "of the Cape Canaveral variety -- it looks like the trail left by a rocket launching from the Kennedy Space Center."

It still does, despite a shallow correction from late February into early March.

My analysis of Thor's chart on Feb. 6 was filled with ambiguity and misgivings, encapsulated in four bullet points.

The ambiguity is still there and can be resolved only by a persistent break-out above the present peak, which has been unsuccessfully challenged four times: $34.07 on Feb. 21, $34.12 on Feb. 21, $34.08 on March 15 and $34.17 today (with a sharp pullback).

ADS had the most bullish chart of 10 stocks added today to the Zacks top-buy list, and THO was the runner-up. Zacks' tracking system is sensitive to changes in analyst opinion. Stocks drop from the top buys list and then reappear with some frequency.

My trading strategy lives heavily in the now. ADS and THO are back on the list with the best charts of the day, so I'm interested in giving them a look.

ADS has not published earnings since my last analysis.

THO published on March 8, producing a new set of financial stats, as follows:

THO's return on equity is 15%, up two percentage points from the prior report, and the company is still free of long-term debt. Institutional ownership stands at 78% -- down two percentage points.

The stock remains cheap: It takes only 62 cents in shares to control a dollar in sales.

ADS next publishes earnings on April 23, and THO, on June 11. THO has yet to announce an ex-dividend date for its next quarterly payout, which comes to 1.81% annualized. A good guess is around March 27.

Decisions for my account: I bought calls on ADS, with a strikes of $120 and expiration in September. I shall defer buying THO until I see a break beyond the resistance noted above.

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.
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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