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Hurco
Makes Herculean Surge - Now Lock It In |
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We
liked
the company on November
19th, though were a little less than enamored with the chart
at the time. By February
1st the chart looked like much more appealing, having started
a post-tumble recovery (the tumble we were worried about back in November).
Since the first of February, shares have jumped from $36.79 to the current
price of $42.00...a 14.1% surge, and they had been even higher.
We're of course
talking about Hurco Companies Inc. (NASDAQ:
HURC). If you were following our lead on the stock, then be sure
to follow this one as well...we think you need to go ahead and lock
in the gain.
 The
decision reprises the age-old argument 'Is it better to be a trader
or investor?' The Micro Cap Press has covered the ground before, ultimately
determining that being able to be both was the most likely path
to big profits.
In Hurco's case,
the initial opinion was meant to be to be a long-term one. However, when
you see this kind of volatility work in your favor, it doesn't make
sense to risk giving the gift back. The investment - by the
virtue of what's happened between then and now - has turned into a
trade. As such, we believe putting on your short-term trader's hat
may be appropriate.
Who knows?
Maybe this stock will become one of those names we want to keep in our
back pocket for a while, so keep your investor hat handy.
 We'll
also admit there was a brief period there after last week's gap where we
considered sticking with our long-term-only view. The bullish gap on the
28th carried shares past the key 200 day moving average line...one of the
biggies in terms of spotting long-term trends. Had HURC managed to stay
above the long-term line, we may not have even brought it up today.
Instead Hurco
shares eased back under the 200 day average, and have stayed there ever
since. We don't get any sense there are currently any more willing buyers
(especially after today's drop). Therefore, further upside may be tough
to produce. We'll take 14% in this environment.
Hurco is still
a great company though, and in our view remains fundamentally undervalued
(remember,
that was our attraction in the first place). Based on current trading
levels, the current P/E is 11.6, and the forward-looking P/E is 9.9. The
price/sales ratio is a low 1.4. The ROE for the last twelve months is a
solid 24.8%, and earnings are growing consistently. Nothing that happens
to the chart - good or bad - will change the company's performance.
Furthermore,
we believe all companies are eventually 'priced right' relative to their
results. That's why we specifically mention our willingness to keep Hurco
on our watchlist. It's what could happen in the meantime that has us moving
to the sidelines...HURC may have traveled too far and too fast for the
market to keep up. We're content to stay on the sidelines until more of
the pullback risk has been abated (or until shares are well undervalued
again).
Just another
lesson in how to balance the trader side of you with the investor side
of you. If it meant you made a decent gain in the meantime, even better.
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Clearly
Canadian Chugging Away |
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Last
week we mentioned Clearly Canadian (OTCBB:
CCBEF) had managed to break past a ceiling at 78 cents...one of
the key events we'd been waiting for. Since then, things have gotten
even better. The stock fell back a bit on Monday, but the recovery effort
has carried shares to new multi-week highs.
It's not an
official trade for us (hopefully it is for you), but we're basically
starting our clock with the break past 78 cents. A realistic entry would
be 80 cents. The current price of 92 cents translates into a 15% gain so
far...not bad, especially considering the way stocks are getting bombed
right now.
 Thursday's
high of 97 cents doesn't come as a total surprise either. We saw a short-term
peak there in November (a failed rebound effort), so it may take a little
extra effort to get over that hump.
Beyond that,
the next significant hurdles are $1.15 and $1.21. Even if one of them means
an eventual end to the rally, it still wouldn't have been a bad move.
That said, CCBEF
is really trying to accelerate now, with no major ceiling in sight until
we get to the 200 day moving average line. Right now it's at $1.67, but
could be closer to the mid $1.50's by the time it's intercepted. That's
also the area where we saw some turbulence in October, so we'd probably
be more than willing to take any profits there if it looked like trouble
was brewing. There's some work to do in the meantime though.
The one key
difference between the last two bullish months and the prior bearish five
months has been news. We barely heard a peep out of the company
in the latter half of last year. This year we've seen a consistent stream
of good news from Clearly Canadian. Maybe they had nothing to say last
year, or maybe they did and just weren't saying it.
Whichever it
was doesn't really matter - the 'take away' is simply that there's something
to be said for communicating with shareholders.
On a side note,
Clearly Canadian's publicity efforts tend to run hot and cold. Once the
effort (or lack thereof) starts though, it can last for months.
Point being, we wouldn't be surprised to see several more months worth
of good news supporting the stock's continued rise.
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Updated: 3:10 pm PST (23:10 GMT), November 20, 2008
