TGIF! What a great week for us. We unveiled the new 16 Days of Oxen and things are going well. Yesterday, we had a fantastic day exiting TSL and DBRN for 5% and 4.% profits, respectively. We also entered a new Midterm Trade in Focus Media (FMCN) that was available only to my new Oxen Group members. We also unveiled the Afternoon Snack that I will include after this post.
(It may be time for a silver rally to get in par with gold…)
On the negative side, we did not hold Marvell (MRVL) into earnings and took a four cents loss. The stock is trading up 7%+ in the market currently after earnings were better than expected. Further, we had to take 4% loss on Chico’s (CHS) for our Short Sale in them.
The market, though, looks ready to breakout. A great day yesterday and a rebound is in the works to move higher today…positive signs. For that reason, I feel comfortable looking at another Midterm Trade, moving into next week.
Midterm Trade of the Day: Verigy Ltd. (VRGY)
Analysis: We start off by saying that, the Verigy merger with LTX-Credence was probably not a great decision by the company. They do get access to some of LTXC’s high profile clients, but the company has a lot of baggage and has not performed well as of late. Yet, at the same time, Verigy has put itself in a place where it has shed nearly all of the investors who did not like the decision and gotten rid a lot of traders involved with it. From pre-merger news about the merge to today, the stock has dropped just 
under 20%.
So, why do we think this is at all a good decision? Verigy is slated to report outstanding earnings next week as the stock has just hit rock bottom. The company is expected to report an EPS of 0.28 vs. one year ago’s loss of 0.02 per share. The company is improving its EPS by 1500%. That type of gain should attract a lot of investors, especially at these levels. The company is even improving quarter-over-quarter by more than 20%.
Competition has performed well additionally. 8/10 of the most similar market cap semicondutor equipment companies have beat or met earnings. No one has been blowing earnings out, but better than expected earnings are still there. Verigy is trading as if it missed estimates and forecasted it would not be able to make a profit next quarter. The company is poised for its best quarter in years, though.
The company’s current RSI is trading at 35, which is extremely undervaluing the stock. The fast stochastics show a complete overselling of the stock, and its moved below its lower band. All these analytics show that momentum to the downside has hit its peak. The market looks strong moving into next week, and at least that should help pull VRGY up if its own earnings prospects cannont.
Great place to buy a company that is turning around its business for a midterm play. Get in while you still can get at such low prices!
Entry: We are looking to get involved at 8.05 – 8.20
Exit: We are looking to exit after a 3-5% gain.
Stop Loss: 5% on bottom.
Good Investing,
David Ristau
