RE:RE:RE:RE:CautionStyless wrote: icecube wrote: I like CPH at these levels. $4.80 was a key target for me.
thedave2006 wrote: come down a long way, worth another entry? had sold all the way up and then moved out of it totally at around 9.00ish for another one in the same space.....oversold cph or not?
Why? why do you like 4.80? From a technical perspective this is not a bad buy, but this company just sucks. With the debt it has, i don't see how they anticipate generate enough free cash flow to pay that down or do additional acquisitions.
There are a few reasons. Please keep in mind that these are only my opinion and observations and not meant to be a recommendation to buy or sell this, or any other, security.
Anyone who wanted to short this stock has done so already. I doubt that we'll see much in the way of new shorts around the $5 mark. A significant bounce, maybe up to the $6.80 - $8.50 area, might be needed to induce new shorting, but it would depend on the cause of the move (if it happens at all) to see if new shorts come on board.
We've had capitulation? Most likely. Those who were diehard longs have now gone all "Fatal Attraction" on the company. Emotions and egos have no place in the marketplace.
Tax-loss-sellers? A) Have they done so already? B) Do they have anything to offset? C) Bounce first?
Seasonal: October, November and December normally (not always) are stronger months in the stock markets.
Alternatives: There are some other great stocks in the sector that could give investors some good value. We've talked about a few. I wouldn't (and don't) limit myself to one sector and within the sector diversification, not to mention quality/risk diversification, is normally prudent.
Catching a falling knife? Maybe. It wasn't long ago that HCG was a falling knife as well. It is interesting to see the similar patterns in stocks that become falling knives. (Note: I wouldn't buy a 'falling knife' unless I see something positive in the fundamental value of the company.) You have the swift knife-like drop, followed by a dead-cat bounce which rolls over to gradually resume a slower down-trend to new lows and final capitulation.
Fibonacci levels? All year this stock has been a near casebook example of Fibonacci retracements and targets as well as wave counts. $4.80 was one of those targets. $4.60 is a secondary one. Maybe we'll see the latter (though wouldn't bet on it) but I'd be inclined to use that as a long opportunity.
We're at the bottom of the long-term channel. This also could provide some support.
We haven't back-tested some of the break down levels like around $6.50 and $10.
There are some gaps on the upside that could get filled - as high as the $11 area.
As we go from this new quarter into next year money managers often start looking at 'next year's' earnings and ask if the company will start to see a payoff for the acquisition. Next year's earnings (2016) are nothing to write home about at $0.11/share. It is into 2017, which some will start to trade upon already, at $0.57/share and 2018 at $1.10/share where it gets very interesting. The 5-year average for the company's forward PE is 21.6 times. Too high of a PE (in my opinion) but a forward PE of 13? (Historical PE and earnings source: Thomson Reuters)
On the flip side, management's track record for hitting earnings expectations is pretty dismal. As is their deal-making abilities. But don't forget, the deal was made when the stock was over double what it is now. So we're paying less than 1/2 the price for the acquisition. I know that it isn't quite that simple, we have to look at the effects of the debt, what its going to do to the free cash flow stream, what is the company's ROE and ROI going to look like, etc. Earnings forecasts have been lowered and there is always the potential for them to go lower still.
The $4.80 area hits a key Fibonacci level, fills and old gap and hits the bottom of the long-term channel. Combined with the other factors I find it to be at least a tradable bounce, if not more. I've been wrong before and I'll be wrong again. This time? Who knows but I still like the risk-reward at the moment.
Again, this is only my (long-winded) opinion and not a recommendation of any sort. I have no knowledge of any of your financial circumstances to know if this, or any other security, is or is not appropriate for you. Nor have I gone into details on some of the items (do your own due diligence and research.) I'm not receiving any compensation for this and yes, I am long CPH. This may change at any time and I will not necessarily provide notification regarding any changes to my position or opinion.