We'd be kidding ourselves if we said the market hasn't been a whirlwind since our last Trader's Corer installment, from May 21st. The Dow reached new all-time highs ten days later, then lost 3% in just the three days after that. Stocks have recouped most of their loss since then, but there's also been a noticeable lack of enthusiasm behind the recent effort. Maybe it's just the dog days of summer finally setting in.
The good news is, we've been hard at work here, finding you some nice trading ideas to put in the Trader's Corner (even if they weren't strictly small caps). We've got a couple of new ones today which may be just what the doctor ordered to overcome a slow, lethargic summer. In the meantime, let's catch up with the previous trades still on our plate.
Our biggest winner is also our oldest idea - Incredimail (NASDAQ: MAIL). It's up 24% since we first mentioned it on October 17th of last year, despite a fairly decent selloff this month so far. It's par for the course though, so we're willing to give MAIL some leeway - it recovered just fine from the last couple of major dips. One more good bounce just may get us to our target of $9.00.
Sprint-Nextel (NYSE: S) has already started to move higher following it's corrective move from early June, thanks to some support around its 20 day average line. Cogent (NASDAQ: COGT) hasn't yet started to move upward again after peaking in late May. However, it's only been in the last three days the stock has found a floor around its 20 day moving average.
Ever heard the advice "Be careful what you ask for - you just might get it" ? We finally got some big movement on China Mobile (NYSE: CHL). It was launched from $45.77 on June 7th to $51.37....a 12.2% move. Nice, but can it be sustained? We've seen three consecutive bullish gaps made, and have to wonder if the size of the bounce is going to weigh in on this name once the market realizes what's happened. We're not going to change the strategy - we like CHL for reasons other than the chart. Just don't be surprised or rattled if this one pulls back to regroup. With a stop of $42.60, we have plenty of room.
The same idea applies to Ford (NYSE: F). It moved from $8.06 to as high as $8.97 in less than two weeks.....an 11.1% rally. It's getting reeled in a little bit, but the ease with which the bullish swing occurred leaves us optimistic about more upside. A move past $9.00 would be a new multi-month high, and could really set this one into motion. If it pans out that way, we may disregard our initial $10.00 target and let it run.
Aetna (NYSE: AET), which started to get some traction in May, faded in June. We considered putting it on the chopping block (and still might), but we have room to be a little patient. Just keep in mind we actually upped our suggested stop on this one to $49.50. So, currently trading at $50.49, when we say we have a "little room to be patient", you can take it literally.
Our two newest trade ideas - Deltic Timber (NYSE: DEL) and Intervoice (NASDAQ: INTV) - are both up by about 5.5% from our May 21st entry.....well ahead of the market's progress since then. The technicals for both look just as solid today as they did a month ago.
And what do we have for you today? Two names we believe have the right stuff to climb higher regardless of what the rest of the market is doing - which is something we'll definitely want if the bulls are getting as tired as we think they might be. The fact that both company names begin with 'I' is a complete coincidence....honestly.
Innovo Group Inc. (NASDAQ: INNO) makes jeans. Period. This is where we'd normally expound on how novel and cutting-edge the company was, but there's nothing complex or high-tech about jeans. Frankly, that's what we like about it....it's 'old economy', meaning they do something we can understand and easily quantify.
And as far as quantifying INNO goes, they've got some pretty good looking fundamental numbers. Though not yet profitable, they could be in the near future. According to their last quarterly filing (for quarter ending on Feb. 24th), net sales improved by 32% to $13.8 million, versus $10.4 million in the same quarter (Q1) of 2006. Innovo also generated positive operating income during their last quarter, not to mention improving gross margins from 29% to 37% on a quarter-over-quarter basis. Selling, general, and administrative expenses were lower by 13%.....$5.0 million versus $5.7 million during Q1 of 2006.
Better still, they recently made a 3 year/$20 million (minimum) distribution deal with a Japanese vendor.
The chart seems to reflect the improvement. Volume surged beginning in June, and the stock has been getting traction as well. Though already up 29.4% for the month, the recovery potential here is much bigger. This stock has traded as high as $6.00 within the last two years. We'll start with a target of $2.61. A stop of $1.40 looks about right to us.
Our other idea is Interface Inc. (NASDAQ: IFSIA). Interface manufactures and sells modular carpets and commercial upholstery, which apparently is a pretty good business to be in. Between the years 2004 and 2006, sales improved from $881 million, to $985 million in 2005, to last year's total of $1.07 billion. Over the same three years, net income moved from a loss of $55 million, to a gain $1.2 million in 2005, and then to a net income of $9.9 million last year.
Their most recent quarter didn't look so great on paper, but that may be the opportunity.....a one-time charge of $50.1 million pulled the company into the red. However, it was the first time in four quarters the company took a quarterly loss, and we suspect things will be righted again come next quarter. However, as long as that most recent data looms, this opportunity may be overlooked by most other investors. A price/sales ratio of just over 1.0 looks attractive to us as well.
Irregardless of any one quarter's problems, the stock is providing rewards. Currently at $18.55, IFSIA is up 30.4% for the year so far, yet doesn't appear to be over-extended. Better still, IFSIA shares seem adept at consistently making those kinds of big gains while avoiding major pullbacks - it's up 488% since the end of 2002.
We feel a target of about $24.10 and a stop loss of roughly $17.23 should provide you with the optimal risk-versus-reward ratio.