Click chart to enlarge Has there ever been a more perfect descending triangle than this one? CREE has held its $60 support level in a textbook way, while putting in lower highs over the past 3 months. Triple and quadruple bottoms never hold, so we have to bet on the odds and say that it's only a matter of time before CREE breaks support. We happen to own it, but are holding onto it anyway. We're looking to buy more CREE, as we feel it's quickly approaching fair value. The confluence of events (falling share price and rising EPS) are shortly going to meet head on.
If the broad market (Mr. Market) continues to fall, it may even give us a below value price on CREE! We'd be backing up the truck if that happened, in keeping with our theory that the LED's haven't seen their highs yet.
The quick math on CREE...
CREE's EPS is somewhere around $1.68, soon to be $1.93.
A fair P/E for CREE is approx 25, in line with its 20% annual growth rate
25 x $1.93 = $48.25
So if CREE drops another 12 points, we could quickly see a rush of buying that brings it back into the 60's in just one or two sessions. Whether you're a day trader, an intermediate term trader, or a long term investor, you should keep your eye on CREE because it may soon offer the trifecta...
1.) Growth
2.) Value
3.) Popularity
9 comments:
Nice analysis Snot, but isn't the same thing true of VECO's chart? And VECO has as good, or much better fundamentals, like P/E and forward P/E, doesn't it?
VECO support around $32
Was yesterday's pop in RBCN probably window dressing from portfolio managers who wanted the winner RBCN in their portfolio when they issued the next report?
VU1, Ginchinchili's stock, is moving on news.
Snot swore off VECO after he/she/they sold it
I thought that too Anon, but the sign of a good trader is the ability to change one's mind and not stay married OR divorced to any particular stock. The name of the game is making money, right?
Joe, we just saw the $60 quadruple bottom on CREE and it jumped out at us as a nearly perfect triangle. VECO may be the better choice. We haven't really decided what to do just yet, as we're waiting to see which stocks hold up the best if the market takes another leg down. We have nothing against getting our account to a position where it's 30% RBCN, 30% CREE, 30% VECO and 10% cash. But to do that, the market would have to really get hit hard (like Dow 7500 or so). As much as we're told not to catch falling knives, we're also told to buy low. It's hard to do both. We feel comfotable buying stocks that hold up well in a market that's tanking, even if the stocks are going lower. The idea is to get in the game, which inevitably involves some loss. Our goal is to get 80 to 90% invested during this selloff (whether it ends in 2 weeks or in 2 months), and then just hold for 3 to 4 months.
Thanks for your thoughts, Snot. I have put most of my money into dividend bearing USA blue chips (e.g. VIG), the beaten down oil sector, and bonds, headed for about a third each, after being mostly cash and bonds on these two "corrections". On the side, I do dividend plays. E.g., I bought T heavily (for me) on Friday, since it pays 42 cents after Wednesday's ex-dividend day. If I can get 0.8% to 1.2% dividend and a minimum of even money on the trade, holding something 3 to 10 days, I'll take it every time. A broker friend of mine is doing mostly dividend blue chips with covered calls. Another friend is heavy Chinese small caps high Beta, mostly those with a P/E under 10. Different strokes for different folks.
Joe, those sure are some very different approaches. How does capitalizing on the dividend work? We always thought you had to be a holder on record for the entire quarter in order to receive the dividend. Is it true that you can just buy and sell around the ex dividend date and get a dividend for the amount of time that you've held the stock? If so, then doesn't the risk of the stock going down during that time potentially outweigh the benefit of the dividend? Guess it would work, though, if you did it enough, as your capital gains and losses would balance out over time, leaving you with just the dividend profits... 1% per week (50% per year!)
I'll never get 50% a year on dividends, because I just do it with $20,000 of my portfolio. Yes, if you buy the equity the day before ex-dividend day and sell it on ex-dividend day or anytime thereafter, you get the full dividend. Many equities rise in price for 2 or 3 days before ex-dividend, especially if the dividend is a decent percentage, e.g. 1% or more, and they drop by that amount on ex-dividend day. Sometimes I have to wait two weeks to sell for even money. Sometimes I get lucky and sell for a profit on ex-dividend day with the dividend as ice cream on top. There are many web sites that list up-coming ex-dividend days. I try to buy something that is paying a quarterly dividend, so that the dividend is over 1%, and buy it on a down day in the market. Monthly dividend equities like DIA or MSP, I tend to hold longer term. And I don't deal with volatile stocks. Usually it is low beta ETFs (like VPU) or blue chips like T and VZ. It doesn't always work out, but at present I have 4% gains from dividends for the year. My short term capital gains profits for the year for all trading are underwater.
free dividend calendar - no need to pay for an expensive dividend service
If the lower tax rate on dividends is taken away by Washington D.C. later this year, another possible trade would be to go after companies that do not pay a dividends, but have a history of using cash to buy back stocks. The stock buy backs tend to cause those equities to appreciate, so if you can hold them long term (which you couldn't have done the last few years and won), your tax burden is lowered. Just think how little tax Warren Buffett has paid over all these years. BRKA and BRKB don't pay a dividend and he bought and held. PKW is an ETF that specializes in these equities, although many of them not only have a history of buy backs, but dividends, but for a Snotwheel, the savvy investor could start with that list of components in the PKW and find the best of breed in cash buy backs, right? This is a strategy I'm contemplating depending on what D.C. does with our tax bill. Whatchathink?
Joe,
Thanks for the info. Your idea of investing in the best of breed "buybacks" sounds good. Just wonder which works better, the short term ex-div approach (with potentially compounded gains), or the buy-and-hold approach. For us, we trade in tax exempt retirement accounts, so the tax burden is not an issue. We therefore have no incentive to hold for 12 months.
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