Wednesday, March 28, 2012

GPX: Capturing tribal knowledge

GP Strategies Corp. (GPX) provides training to help workers do their jobs better, increasing performance as a way of making their company more competitive. The instructional programs focus on sales and technical training,

My favorite bullet point in GP Strategies' mission tasks, from their website: "Capturing your organization's tribal knowledge to support your continual competitive environment."

Tribal knowledge? Sort of a Lord of the Flies strategy?

It's an odd concept, but large organizations really do function like the tribes and clans of our ancestors. We human beings are not so far from the stone age as we might think.

Headquartered in Elkridge, Maryland, GP Strategies operates mainly in the United States and the United Kingdom but has outposts in Latin America, continental Europe and South and East Asia.

GPX had the most bullish chart among 22 stocks added today to the Zacks top-buy list.

The GPX price has been in an uptrend since early 2009. The most recent leg up began Oct. 4, 2011 at $9.16 and has risen with three short-lived corrections to Tuesday's high of $17.60.

Long term, the price is well below its all-time high. It faces possible resistance at $19.13 and $23, both highs set in the 1990s.

Fundamentally, the first thing to be said of GP Strategies is that it is a small company, with market capitalization of only $329 million. Average volume is only 45,000 shares, and it has no options.

So this would be a shares-only play with no possibility of insurance and all the risk associated with a small-cap company engaged in providing a consulting service.

Within that risky world, GPX has done well for itself, with return on equity of 13% and no long-term debt. Institutions own 81% of the shares, so there are some smart people out there who see profit in the company. And the price remains relatively cheap -- it takes 98 cents worth of shares to control a dollar in sales.

Comparing quarter to year-ago quarter, earnings have been accelerating for the past three years, although within a year earnings have tended to hop-scotch a bit. I'm presuming that's due to seasonal factors influencing corporate training schedules.

Next earnings will be published on May 3.

Without options it is impossible to talk about implied volatility. The average daily price fluctuation is 2.4%. The price fluctuates 40% more widely than does the S&P 500.

Decision for my account: I like the chart, despite the antique resistance. Certainly the price hasn't faltered when it has encountered lower resistance levels from long ago. The financials are exemplary. However, I'm rejecting the trade for my account because shares alone provide insufficient leverage to make it worth my while. Also, the lack of options makes it impossible to do a covered call play, which cuts off GPX as a source of monthly income.

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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