Trading Tips

Alternative energy is no longer just a utopian dream; it’s already a large and growing sector of the worldwide energy complex. Still, the sector is young enough for investors to find companies that are still in their relative infancy, and are poised to capitalize on that growth in the years ahead. One of those is Hydrogencis (HYGS), according to Joe Springer in his extensive Seekingalpha article, “5 Reasons Hydrogencis Could Triple.”

“We think that Hydrogenics Corporation is one of the most undervalued stocks in the market,” Springer stated. “Hydrogenics is the leader in the very large renewable energy storage market. It also has a fuel cell power systems business that addresses substantial emerging markets. Hydrogenics is on the cusp of profitability, and has some of the best intellectual property, partners, and contracts in its markets.”

The first trend Springer feels will help HYGS grow is the simple expansion of worldwide alternative energy demand. “Since 2000 both wind and solar energy have been expanding at a dramatic rate. Per the International Energy Agency wind energy has developed at more than a 24% compound annual growth rate from 200 – 2011, and solar at more than 37%”

Springer said that in 2012 alone, “around 23,350 new wind turbines were erected in 60 countries, supplying nearly 45 GW of newly installed wind capacity. That brought the world count to more than 280 GW of installed wind capacity. For reference, this wind energy is expected to supply 2.62 of the world’s electricity in 2013.”

Also buoying the prospects for Hydrogenics is the increasingly competitive “grid cost” of generating electricity from wind and other renewable energy sources.  “Perhaps the most important contributing factor to the ongoing growth of renewable energy is that it is becoming economically viable. Variables of wind and solar availability and access to traditional fuels make every market different, but renewables are achieving “grid parity” in increasingly more places in the world – renewables are becoming price competitive even without government subsidy,” Springer concluded.

You can find more of Springer’s in-depth analysis on HYGS here.

A surprising contraction in China’s economy led to a global sell-off in equities this week, which begs the question, which way is China’s economy headed? In his Motley Fool piece, “Why China’s Surging Economy in Trouble,” Dan Carroll analyzes where the Chinese economy has been, and where it might be headed.

“Much has been made of China’s rapid economic growth in recent years. The world’s second-leading economy has grown from an average regional player 30 years ago into a powerhouse today, commanding a gross domestic product of more than $12 trillion when adjusted for purchasing power,” Carroll begins. “According to the OECD, China’s GDP will overtake the U.S. for the top spot worldwide by 2016.”

First, Carroll questions the premise that China really is an emerging economic superpower. “A closer look reveals a country facing numerous challenges in the years ahead,” Carroll notes, “and a nation that isn’t ready yet to take its place at the world’s economic peak. Investors caught up in this growth story shouldn’t overlook a Chinese future fraught with risks.

Among one of many hurdles the Chinese economy will have to jump is the rise of a Chinese middle class. “The rise of China’s middle class is one of the pivotal demographic shifts of the early 21st century. The OECD currently estimates that about 10% of China’s population is in the middle class — a number that could grow to as high as 40% by 2020. With that rise comes a bevy of problems that threaten to derail the government’s lofty growth predictions,” said Carroll.

One of those problems includes rising housing costs as more people flock to urban areas. According to Carroll, housing costs have exploded in Chinese cities as the nation’s urban population swells. “Prices in Beijing grew more than 8% year over year in March alone, and the Chinese government’s attempts to curb housing prices have met resistance from municipal half-measures and reluctant local officials.”

You can read much more of Carroll’s in-depth take on China’s present and future economic challenges here.

If you’ve traded stocks for any length of time, then you’ve probably experienced the bad feeling of a stock you own “gapping down”—moving quickly and inexorably to a significantly lower price than the price you paid. Reading when a gap down is a definite sell signal, or when it may be okay to hang on to the stock in anticipation of a price recovery, is the subject of Juan Carlos Arancibia’s Investors’ Business Daily piece, “When to Hold Or When To Sell if a Stock Gaps Down.”

“Any time a stock gaps down, it serves notice to the market,” begins Arancibia. “No matter the magnitude, a gap down in share price warns of an abundance of sellers. Often, those sellers will stick around and the stock will continue falling. Other times, however, the selling is temporary and the stock can get on with its life.”

Before describing “how to tell the difference from survivable gap downs from the outright pernicious ones,” the author wants readers to be clear on the gap down concept. “First, let’s make sure what a gap down is: It’s when a stock trades an entire day in a price range below the prior session’s low. The ‘gap’ from the prior day’s low to the high of the next day tells investors that market makers and specialists on the stock exchanges had to bring the share price low enough to draw enough buyers.

According to Arancibia, these characteristics tell you the gap down is more severe: the gap comes amid heavy volume, a sign of intense institutional selling; it breaks a key support level, principally the 50-day average; it creates a sell signal, or sell signals are already in the chart—for example, a gap down that becomes the largest one-day loss since the start of the stock’s major advance, or a significant loss in the heaviest volume since the stock’s run.

You can find out more on the subject as Arancibia discusses two gap down occurences, one with shares of Cree Research (CREE), and the other with shares of Buffalo Wild Wings (BWLD), here.

I hope you’ve had a chance to read the time-sensitive

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In case you didn’t, here’s the “Cliff Notes” version…

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Below you will find the link to the…

WEALTHPIRE, INC. SPECIAL INVESTOR BULLETIN
——————————————
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Market… TODAY!

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and… why most traders miss out on this window of
opportunity.

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in 2-1/2 months.

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CEO WealthPire, Inc.

Carnival Corporation (CCL), the international cruise line operator, has been in the headlines recently for all the wrong reasons—fire aboard a ship, passengers becoming ill, inadequate on-board sewage on voyages, and most recently a reduced profit outlook. Dimitra Defotis, in her Barron’s piece “Can Carnival Right the Ship,” analyzes the company’s future prospects.

“Shares fell 5% Tuesday morning to $33.60 after the cruise ship operator slashed its per-share profit guidance range to $1.45 – $1.65, from $1.80 – $2.10 for the current fiscal year ending in November,” Defotis begins. “It clearly will take Carnival more than a few months—and a bigger marketing budget—to repair its reputation after the February engine fire that left vacationers stranded in the Gulf of Mexico for days without adequate food or plumbing, not to mention other mishaps and last year’s deadly Costa Concordia shipwreck.

Although Carnival maintained its guidance for earnings of between four cents and eight cents for the second quarter, which ends this month, their fundamentals are shaky.  “Carnival has increased bookings by slashing prices. However, cancellations, higher fuel costs and the negative impact of currencies will further pressure results this year,” said Defotis. “It expects 2013 net revenue yield to decline 2% to 3%, rather than be flat as it previously indicated. Carnival likely will need to continue cutting prices to fill its ships.”

Defotis notes that this weaker outlook comes just as Carnival enters the crucial summer travel season. “The company is expected to earn most of this year’s profits in June, July and August, and advance bookings clearly are not where they need to be.”

Carnival earned eight cents per share in the first quarter, which ended in February, better than the two cents analysts expected. Wall Street is looking for earnings of only six cents in the fiscal second quarter ending in May, earnings of $1.49 per share in the third quarter and 12 cents in the fourth quarter.

You can read Defotis’s complete analysis here.

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Why?

Because I’m putting the finishing touches on a special
trading bulletin titled…

—————————————-
How The World’s Best Traders Are Beating The Stock
Market… TODAY! —-
————————————

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This factor is at least partly responsible for
generating the…

——————————————–
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——————————————–

In the bulletin I’ll tell you all about how this record
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personal portfolio in the history of the stock market.

Plus, I’ll also reveal…

- What researchers at the University of Chicago verified
as the third factor to stock market returns.

- How one man used this “factor” to turn $11,000 into
$42,000,000 in three years.

- Why this is perfect for regular traders who want quick
and consistent gains without all the hard work of
picking stocks.

- The other two ways to make serious gains in the stock
market. And why they pale in comparison to this one.

- How to bet only on the winning stocks as they are
proving themselves to be winners.

- When the biggest gains for individual stocks happen…
and… why most traders miss out on this window of
opportunity.

- How to find the TOP 1% of stocks most likely to surge
in price. (Try asking your broker if he knows. Ha!)

- How 10 trades using this factor turned into 243% gains
in 2-1/2 months.

And a ton more I don’t have time to explain right now.

So listen: This bulletin will be ready in the next few
days. In the meantime, I have another email to send you.

The next email (you’ll get it in a day or two) explains
how finance researchers proved this is the last factor
that determines stock returns.

Stay tuned…

Regards,

Manny Backus,
CEO WealthPire, Inc.

P.S. By the way, the subject line of the next email will
be…

The “Unkown” Factor To Stock Returns

Make sure you read it.

Usually, when a stock you own gets good press, it often translates into profits. Nobody wants to miss “the next big thing,” and that can fuel buying interest in an issue. Interestingly, Investor Business Daily’s Scott Stoddard suggests in his piece “Wide Media Coverage May Signal Your Stock Has Peaked,” that too much media coverage on a stock may translate into too much of a good thing.

“Media hype can help drum up interest in the Super Bowl, a new TV show or some other event and boost interest and ratings,” Stoddard begins. “But in the stock market, heavy media coverage is often a lagging indicator, kicking in after a stock has already enjoyed a big run.”

Stoddard points out that magazines like Fortune and Forbes typically run cover photos and profiles of companies or CEOs in part to satisfy their readers’ interest in finding the secrets to success. That helps sell copies. Whether or not the prices of the stocks that media outlets profile rise or fall is a secondary concern.

Stoddard uses the historical example of Oracle’s (ORCL) share price rise in late 1999 and early 2000. “Oracle is a good example of a stock that began attracting huge media attention after it had already enjoyed a huge run-up,” he stated. “Oracle cleared an 11.76 buy point (adjusted for a pair of 2-for-1 splits, both in 2000) in a flat base-on-base pattern in the week ended Oct. 29, 1999. Over the next year, it quadrupled to a peak of 46.47 in the week of Sept. 1, 2000, about six months after tech bubble reached its zenith.”

According to Stoddard, the database and business software developer continued to attract media attention as it was peaking. IBD ran stories on the company in March 2000. In June that year, Oracle founder and CEO Larry Ellison was quoted as saying that the company’s potential was “breathtaking.”

Learn more about what happened to Oracle shares from that point in Stoddard’s full analysis, which can be found here.

Jim Royal is a regular contributor to the Motley Fool, specializing in writing about “special situations”—identifying stocks that he believes should rise in price for very specific reasons. Last month, in a piece titled “I’m Putting Real Money on This Spin-Off,” he  wrote about a recent spin-off from Valero (VLO) called CST Brands (CST), which he added to his special situations list.

According to Royal, CST Brands operates nearly 1,900 convenience stores/gas stations in the U.S. and Canada. Over 1,000 sites are located in the U.S., with about 60% exposed to the robust economy of Texas. Domestically, the company owns 81% of its locations. In Canada, over 60% of outlets are in Quebec, while just 38% of sites are owned.

“Last year CST generated revenue of $13.1 billion and would have made $379 million in EBITDA as a stand-alone entity. In addition to fuel sales, the company relies heavily on tobacco and alcohol – about 50% of store sales – like other convenience stores do. Store sales are a key driver of profitability,” Floyd stated.

He also said that the convenience store industry is “surprisingly robust, with consistent growth over the past two decades, the only interruption being the financial crisis. And even then it was only fuel sales that dipped, not the more lucrative inside sales. CST expects to grow store count about 1.5% this year and refocus on growing inside-the-store sales.”

Something has gone right since Floyd first put his spotlight on CST. At the time he wrote about the issue, it was trading at $27.50 per share. Currently, CST shares are trading north of $33 each.

You can read more details about why Royal believes CST Brands fits his “special situation” criteria, and how the valuation of competitors’ stock compares to CST’s, here.

Before the month of May ends, stock analysts everywhere are taking up the old adage, “sell in May and Go Away,” and putting their own spin on it. Last week we presented an article on the market’s historical performance in May, which didn’t support the adage. Today, Jonas Elmerrajii takes a look at a basket of stocks he thinks should be sold in May in his Stockpickr article “5 Toxic Stocks to Sell in May and Go Away,”—even though he doesn’t believe that the adage itself is a good one.
“By now, you’ve probably heard the clichéd expression “sell in May and go away” about a million times. I’ve said before that I don’t think it’s good advice for the broad market in 2013— but for a small group of “toxic stocks,” that trite phrase could be pretty sage wisdom,” Elmerrajii begins.

In spite of the broad market rally this year, he believes that some stocks are looking “toxic” right now for a variety of reasons “And those names that are underperforming — or showing signs of a major bearish change in trend — could drag mightily on your investment returns this year,” he cautioned. “While a rising tide lifts all ships in a bull market, it also hastens the sinking of the few ships with holes in them.”

Relative weakness is the primary technical indicator Elmerrajii looks for as a sell sign. “One of the biggest red flags right now is relative weakness; The stocks that aren’t participating in the across-the-board equity rally are the ones that you need to think about unloading. And the ones that are looking outright bearish are the ones that you need to sell now.

While acknowledging that the companies on his list—Sonoco Logistics Partners (SXL), Canadian Pacific Railway (CP), Eni SpA (E), Cenovus Energy (CVE) and Vodafone (VOD)—“aren’t junk,” Elmerrajii provides an in-depth analysis of why they may merit selling here.