…And You Thought Winter Was Over

Written by GSCR Staff   
Thursday, 14 May 2015 07:04

 

In Monday’s Guide we mentioned that we may be in for a rough ride for a while.

There was a great article in MarketWatch the other day that put a funny spin on it from the sports quotable icon, Yogi Berra. Here is the link.

 

http://www.marketwatch.com/story/the-best-yogi-berra-quotes-for-todays-market-2015-05-12

 

All kidding aside this market may call for some short term trades with seasonal and or technical plays. Today’s stock features both.

 

Arctic Cat, Inc. (NASDAQ – ACAT - $32.51)designs, engineers, manufactures, and markets snowmobiles and all-terrain vehicles (ATVs), and recreational off-highway vehicles under the Arctic Cat brand name.   It also provides related parts, garments, and accessories. The Company markets its products through a network of independent dealers in the United States, Canada, and Europe; and through distributors representing dealers in Europe, Russia, South America, the Middle East, Asia, and other international markets.

 

 If we drew a template of a head and shoulders pattern over ACAT over the last five months, all indications are that we may be heading to a bottom. If we take the peaks of $38.48 and $39 February and April respectively as are head, and $37.25 as shoulder peak one, then we can roughly estimate that a neck line, or buying price, of $29.50 sometime in late May or early June.

 

From a fundamental standpoint, ACAT is attractive prospect with a PEG ratio of 2. The Company also had no debt as of December 31, 2014. Finally, Arctic offers a relatively healthy dividend currently yielding 1.4%.

 

Again, we think ACAT could be value here as a trade.   Pulling the trigger somewhere from our head and shoulders calculation of $29.50 and the 52-week low of $26 could reap some short term profits. Knowing when to sell again will be the key. From a historical perspective it appears the periodic price swing average about five to six months.

 

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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