7-25-09 - Hot Sector Makes Lee Enterprises(LEE) Perfect

It now looks like http://theperfectstock.blogspot.com has plenty of quality stocks to choose from. The stock market was hitting on all cylinders last week lead by strong and/or improving earnings in several sectors. Just as I had predicted on one of my other blogs, the DOW blew past 9000. Technology has been one of the leaders in pushing the market higher, but the hottest sector right now is the Newspaper/Media stocks. Several of these companies have more than double in share price over the last week, but I feel that there is still a great opportunity for significantly more gains in select names. The newspaper stock that I feel has the most potential to move higher is Lee Enterprises, Inc. (LEE). It is my selection for the next perfect stock.

Lee Enterprises is a provider of local news, information, and advertising in primarily midsize markets with 49 newspapers and a joint interest in 5 others, growing online sites and more than 300 weekly newspapers and specialty publications in 23 states.


As stated early, newspaper stocks have been on fire. Gannett Company, one of the larger publicly traded newspaper stocks got the ball rolling last week with a surprising profit for the quarter despite significantly reduced advertising revenue. However, the most important nugget from their conference call was that they were beginning to see a turnaround from the advertising decline and that they believed the worst was over. All of the other newspaper stocks reporting earnings that have followed Gannett also exceeded expectations. As a result, all the stocks in the sector have benefited.


LEE reports earnings 6/30/09. Most of the these newspaper stocks were able to achieve profitability last quarter because of significant cost reductions. Basically, they cut a lot of "the fat". LEE has done pretty much the same thing; consequently, it's a very good chance they'll have similar results. One bit of news that came out a several weeks ago that bodes well for the company was that its board voted not to increase the share price via a reverse split. This decision implies that LEE is confident that it will be able to increase its share price on its own merit. With the NYSE threatening delistment and an earnings report right around the corner, investors/traders have to be fairly confident that the report will be pretty good with so much on the line.


See the chart below for LEE.

You can see the stock had quite a run last week on increasing volume. Notice the trend line of the chart in purple. This week's close marks the first time LEE has finished above that trend line. This is a possible sign of a reversal.

For my true technicians, the chart above shows a strong crossing of the MACD (Moving Average Convergence / Divergence) line through zero. This is a more traditional sign of a bullish reversal. Whether you're just a trend follower like me or a die hard technician, all indications are that this stock will continue to move much higher.

Short Squeeze Potential

From those charts you can see that LEE's share price doubled last week. Much of that quick movement was due to short covering. What's interesting is that LEE began last week with about 7 million shares sold short. At the end of the week there were still 5 million shares short according to www.shortsqueeze.com . Therefore, the stock doubled after only 2 million shares were covered. With just 44 million shares outstanding and the float shrinking daily, what will the share price be if the other 5 million shares are covered? I'm not going to assume a linear ratio, but you can reasonably expect a continued fast and significant increase in share price from the $1.21/share it is currently with any upward pressure.

Hedge and Mutual Fund Sector Rotation

I've recently read a bunch of articles claiming that people shouldn't get so excited about the recent earnings and movement of the newspaper stocks because ad revenues are still much lower than they use to be and cost cutting is only a temporary fix. Some have even claimed that those share prices will quickly go back to their historic lows once the euphoria dies down. It's as if every article is written by a short seller trying to protect their short position. What those pessimists failed to write was that the market cares about guidance and improvement. You cannot minimize the improvement and return to profitability of the other newspaper stocks that have reported by simply focusing on ad revenues. The fact of the matter is that all of these companies needed to get leaner and are now light years better than where they were 3 to 5 months ago. The big money guys like Hedge funds and Mutual Funds recognize this and are smart enough to realize the bottom is in and it's now time to buy. Many of these funds have mandatory diversified allocations. You can bet that much of the money that left the sector will eventually be put back in, particularly when there are technical signs of a reversal. After looking up several stocks in the sector that have already reported earnings on www.thebuylist.com , you can see that money is being slowly rotated back into this group. Again, bullish for LEE.


The morning shake and late afternoon pullback that occurred Friday was a great opportunity to start a position in LEE. The late day sell off was pretty predictable because many people wanted to lock in profits from the significant gains of the week. There's a chance Monday that LEE may get off to a sluggish start, but it should only be temporary. A. H. Belo Corp. (AHC), another publicly traded newspaper stock, reports earnings Monday morning. If they follow the same trend as the others, LEE will be off to the races again. Either way, I'm expecting a sizable runup prior to the earnings report on Thursday. If you want to be conservative, you could sell prior to the report, but you may miss out on the chance for significantly higher gains. Keep in mind that Gannett has traded higher 9 of the last 10 sessions. LEE has only done it 4 of the last 5 so don't assume it's overbought. Based on momentum, the high probability of a good earnings report, strong technicals, potential short covering and fund sector rotation, a sea of green could be in LEE's future as well as yours. Lee Enterprises, Inc. (LEE) the next perfect stock.

7-21-09 - FDA Approval In Waiting Makes Nuvo Research, Inc. (NRIFF.PK) Perfect

I've got a new post here at http://theperfectstock.blogspot.com/ . The last selection of CIT was not necessarily a terrible one. I just didn't time it correctly. This next stock, I believe, is timed perfectly though. It's "technically" perfect and has one of the best setups I've seen in a while for an explosive two week run. The next perfect stock is Nuvo Research, Inc. (NRIFF.PK or NRI.TO). Since many people don't readily have access to the Canadian exchanges, we'll focus on NRIFF.PK.

First of all, I cannot take all the credit for this one if it does do well. One of the readers of the blog named Aroramax, "bought" it to my attention last week. Now, I think is great time to pull the trigger.

Nuvo Research is a Canadian drug development company focused on the research and development of drug products that are delivered to and through the skin. The Company’s lead product Pennsaid, is used to treat the pain and symptoms associated with knee osteoarthritis (OA). Pennsaid has been approved for marketing and sales in the countries, including Canada, the United Kingdom, as well as certain European countries.

Pending News

Currently, the Pennsaid is up before the FDA for US approval. If approved, Nuvo will receive an up-front, payment of US$10 million and is also eligible to receive a US$15 million milestone payment on Pennsaid's approval by the FDA, which will increase to US$20 million if certain labeling criteria are agreed to by the FDA. Also, the submission to the FDA was after the company had already received an "approvable letter" for Pennsaid. In other words, they were told by the FDA that if they just did a couple more things, they would get approved if they resubmitted. Consequently, NRIFF is almost assured of approval. It is scheduled to be announced on 8/5/09.


See below for the chart of NRIFF.

The stock did nothing for months, then it finally began to move beginning in May. After settling in the 30 cent area for a month and a half, this week marks the beginning of a breakout as the stock surges to new highs. Most people believe the stock briefly stalled in the low 30's due to warrant pricing. Those warrants finally expired earlier this week and seemed to correspond with the breakout. Looking at the volume chart, you can also see that the volume is beginning to pick up again as well. All signs point to a substantially higher move.


NRIFF seems to be following the same pattern as some other successful biotech stocks that were awaiting FDA approval. HEB and NEPH are just a couple of many names that more than doubled under similar circumstances. Investors/traders always keep in their memory banks what has recently worked. This should strongly work in NRIFF's favor.

Insider Trading

Because Nuvo is a Canadian company, you can easily keep up with Canadian insider transactions at http://www.canadianinsider.com/ . No insider has sold the stock this year, but several members acquired shares through a pre-approved ownership plan at just under 11 cents a share. The fact that we are now near 40 cents and still none of them have sold, has got to be considered bullish.


Everything is pointing to NRIFF really being a big winner in the next 2 weeks. Nuvo has quite a few shares outstanding (over 300 million), but because the share price is so low and interest in the stock is beginning to mount, the float is slowly, but surely thinning. Don't be alarmed by the number of shares traded on NRIFF.PK. NRI.TO gives you a much better indication of the true volume. The price of NRIFF.PK adjusts as the value of the dollar vs the canadian dollar changes. Currently the stock sits at 38 cents. I'm expecting a steady rise until the 5th and see 60 cents as an eventual trading level. Nuvo Research Inc. (NRIFF.PK) is the next perfect stock.

7/13/09 - Possible Government Bailout makes CIT Group (CIT) Perfect

It's been a while since I've posted at http://theperfectstock.blogspot.com/ . The opportunities for quick, big gains have been drying up as the market settles down from a tremendous start to 2009. As I've stated before, this blog aims to achieve 75% - 100% gains in a short period of time. I specifically put dates on all my posts so readers can look back and see how successful each pick has been. See below for the blog's scorecard:

Remember, these are short term holds. In most instances the gains won't hold so always take your profits when the opportunity presents itself. My next perfect stock choice is one that hit its 52 week low today, but bounced hard off of it. Several factors could propel this stock to fast gains for investors/traders in the next couple of days. CIT Group , Inc (CIT) is the next perfect stock.

CIT Group operates as the holding company for CIT bank that provides commercial financing and leasing products, and management advisory services to the small and middle market companies worldwide. Right now the company is struggling and bordering on bankruptcy. I know. You're trying to figure out how in the world a stock that hit it's 52 week low today and is bordering on bankruptcy could be a perfect stock?


This afternoon, a report was released that CIT was involved in talks with the federal government regarding the receipt of aid, which would allow the company not to fail. Despite, what the general public would have you to believe, small business is the backbone of this country. Because CIT services so many of these companies, the government is afraid of the economic consequences if it is allowed the fail. It has been reported that the talks are quite far along. This kind of news can cause a "V-shape" reversal in a stock.

Also, the financial sector has been taking a beating the last month or two after a sizable runup off their lows. People are now finally beginning to believe that this recent drop has been a bit overdone. Meridith Whitney, who has probably been the financial sector's biggest bear, came out today with something actual positive on a least one giant member of the group-- Goldman Sachs. That change in sentiment spearheaded a strong reversal in most all financials. The rally is likely to continue for the group particularly if Goldman's numbers are as strong as most people believe.


Let's take a look at couple of charts from CIT. First is the 3 month chart.

As you can see the stock has pretty much dropped from $4/share to $1/share in a little over a month. You can also see that the volume has increased significantly and the selling has accelerated the last couple of days. The action looks an awful lot like shorting to me. Now look at the 7/13/09 intra-day chart:

After hitting the low early in the morning the stock rose 20%-30% throughout the day. This type of action is typical of a stock reversing from its lows. With news accompanying the reversal, it is highly probable that the rise will continue.

Short Squeeze:

According to shortsqueeze.com, there are over 50 million shares of CIT being shorted. With heavy institutional ownership, that represents a large portion of the float. As the stock gains in price, particularly with news of a government bailout, the shorts will cover. The squeeze will cause a huge pop in the share price and a lot of money could be made the next couple of days because of it.

Institutional Buys:

Based on the massive selling the last couple of days, there will probably be news released of some institutional selling in the next couple of days. However, there are still some mutual funds that have invested large sums of money in belief that CIT will recover. RiverSource Investments LLC, bought 12.7 million shares between March 31 and June 30, bringing its stake to 44.3 million, according to a July 10 regulatory filing. Other buyers in recent months include Fidelity Investments, Brandes Investment Partners LP, Vanguard Group and Wellington Management. Also hedge-fund manager Edward S. Lampert of ESL Investments (better known for his controlling stake in Sears Holding Corp) bought shares in the struggling company. All the big money buyers does lead one to believe that a recovery could be on the horizon.


CIT ended today's session at $1.35/share and ended after hours trading up another 25% at $1.70/share. In my opinion, this is just the beginning. Ideally, you'd like for news of progressing talks to leak throughout the week without any significant details released. That would allow the stock to achieve a snowball effect thus crippling the shorts. Personally, I'd like to get out before a formal deal is announced and then re-evaluate afterwards. To often, government aid is dilutive or non-beneficial to the shareholder. It may not be the case in this instance, but I'd prefer not to take any chances. I can't quite predict where the stock will go, but I feel confident that there is still a huge opportunity to make some good money. Just be sure to take your profits. News, technicals, short squeeze potential and institutional buying makes CIT the next perfect stock.