Tweety Bird Would be Proud

Written by GSCR Staff   
Wednesday, 28 May 2014 08:31

In yesterday’s Goldman Guide, we outlined a system associated with the ‘Dead Cat Bounce’ and offered up a prospect which happened to rise 15% yesterday (Aeropostale – NYSE – ARO.) This strategy is extremely relevant in a sideways market especially in the summer sell-off season. The term conjures imagery from childhood cartoons with Tom Cat and Sylvester constantly scheming and constantly losing to their arch enemies Jerry Mouse and Tweety Bird. With a hopeful smile from the reference, let’s get down to business.

 

We featured the Taiwanese semiconductor firm Himax Technologies, Inc. (NASDAQ – HIMX - $6.62) as a 30-30 pick in early 2013. HIMX is still up over 106% since then, but has plummeted from a high of $15.65 since early March. Some close attention has been paid to the stock recently with coverage initiated by Lake Street and along with a positive mention by Rosenblatt Securities. The forward growth estimates still reflect a 12-month P/E of just 11x. Additionally, growth in the Chinese Smartphone industry is looking like it is expanding. We say the dead cat bounce for HIMX has the potential for 20% rise from current price levels.

 

We featured Jamba, Inc. (NASDAQ – JMBA - $10.82) in the Market Monitor in late February 2013. The stock is down over 21% in price level since then, but hit $17.43 in June 2013, which was about a 25% price increase since the initial article. Additionally, we advised to take some profits on JMBA in July 2013 at $16.22. But. enough with the history. We believe JMBA is a legitimate dead cat bounce candidate.

 

The short term Daily Moving Average is very bullish for starters. Also on the technical side, last week the stock hit a 52-week low. On the product side, the Company announced it planned to roll-out its new fresh-squeezed juice platform in 500 stores nationally by June 2nd instead of the end of 2014. The growth estimates still put the forward P/E at 15, versus the trailing P/E over 60. We believe a dead cat bounce to $11.50 is entirely possible over the next several weeks for JMBA, if shares become weak.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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