|Written by Rob Goldman|
Halloween is around the corner. Why not buy a stock now that can benefit in the weeks ahead?
APPLE KEEPS THE BEARS AWAY
We have seen this movie before. Granted, it’s been a while. But, Apple (NASDAQ— AAPL) did something it hasn’t done in ages. It carried the market. It faced the bear and it beat it. If not for Apple, we would not have seen the big up week from the NASDAQ Composite. You can see it with the RSI which leaped ahead for the NASDAQ but only moved up incrementally for the rest of the major indices. What does this mean? Don’t believe the market run.
Today we stand at the halfway point of the month, and the last 2 weeks of the quarter. Judging by some sector and market moves at the end of last week, institutional window dressing is all but complete and major investors are focused on finding GARP stocks that are diamonds in the rough, or stocks that will have a good Q4 and 2017.
Usually at this time of year, especially during a Presidential election year, investors start to gear up for buys of companies that reflect the prospective winner’s policy. Well, a few weeks ago a Clinton Presidency was all but assured. Now that it is in doubt, it has added more uncertainty to the market. So, don’t get caught in that trap, either. The good news is that we are 51 days from the election and as we get closer we will have a better sense of policy as well. Moreover, the near record institutional cash levels may actually be put to use instead of sitting on the sidelines. So, bulls, get ready!
The Stock Market Today
I have often mentioned that I tend to be early on certain situations. This could be one of them. Still, I am sure you will agree that the thesis is sound. We are about 6 weeks away from Halloween and what better way to play (from the small cap perspective) than the Rocky Mountain Chocolate Factory, Inc. (NASDAQ—RMCF—$10.11—NR).
Headquartered in Durango, Colorado, RMCF is an international franchiser of gourmet chocolate, confection and self-serve frozen yogurt stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. As of August 18, 2016 the Company, its subsidiaries and its franchisees operated 573 Rocky Mountain Chocolate Factory and self-serve frozen yogurt stores in 43 states and a number of countries abroad. For the fiscal 2016 year, RMCF recorded $40.5M in sales with $0.73 in EPS. Not too shabby. The 4 most recent quarters generated around $3.5M in operating profit on $39.5M in sales, a roughly 9% margin. That is healthy for the space, especially considering it included a seasonally weak quarter.
While there are no listed Wall Street analyst forecasts, we believe that the stock could enjoy a 20% gain from current levels, as the stock trades less than 14x last year’s results, and 1.5 sales. The chart looks lousy and the shares appear weak, which we view as a good entry signal, as the stock has a history of big jumps following meaningful declines. RMCF also pays a 4.75% annual dividend, which is a nice bonus. With Halloween ahead, and results to be released before the 31st of October, we believe RMCF can bring investor sweet products and a sweet return.
Great info, insights, and hard-hitting stories make up this week’s Say What? feature...
The New York Post
Are you ready for this?
An example of “late to the party.” Some of them are buys now.
You will either make a killing or it is a trap. Read and decide.
A fantastic rant.
AAII Sentiment Survey (figures rounded)
Boom! And just like that, Bears start to take over, with Neutrals and Bears at the same rate in the AAII survey and the percentage of Bears besting the Bulls in the Ticker Sense poll. That has not happened in a number of weeks. For the AAII survey, it has been almost exactly 90 days since we have seen this level of Bearish respondents. For that matter, I believe that since we began tracking the Investors Intelligence figures a few months ago, the percentage of bulls is under 50% for the first time. Moreover, the Bull/Bear ratio has dropped by 20% in the past 2 weeks alone. It is clear caution will dominate sentiment ahead.
1498 Reisterstown Road, Suite 286 Baltimore Maryland 21208 Phone: 410.609.7100
Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With some exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors’ bios, certifications, and experience can be found on our website: www.goldmanresearch.com
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter.
Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored microcap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles.
Goldman Small Cap Research has not been compensated for any content in this issue.
All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of our articles about the company featured in this newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.