Ken Gruneisen
Founder & Contributing
Writer to CANSLIM.net
Lighthouse Point, FL
Stock Picks 3-24-08
MasterCard Inc.: MA
MasterCard Incorporated, together with its subsidiaries, provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers cheque programs. The company develops and markets payment solutions, processes payment transactions, and provides consulting and information services to customers and merchants. The company's payment programs, which are facilitated through its brands, include consumer credit and debit programs, commercial payment solutions, stored value programs, prepaid programs, and contactless payment solutions. As of December 31, 2007, it served approximately 25,000 financial institutions worldwide.
The company was founded in 1966 and is headquartered in Purchase, New York. MA hails from the Financial Services- Misc group which is presently ranked 50th on the 197 Industry Groups list, which satisfies the L criteria. There were 115 top-rated funds with an ownership interest in March '07, yet that number jumped to 248 as of December 07, offering a very strong sign of increasing institutional interest (I criteria). More encouraging, the stock only has 71.5 million shares in the float which is much less than most of its peers. Having a small supply of shares is a characteristic that most of the greatest stock market winners exhibited before they enjoyed explosive moves up.
Its annual earnings growth history has steadily grown over the past few years which has helped satisfy the A criteria. It satisfies the C criteria with solid quarterly earnings increases in the 4 latest quarterly earnings comparisons above the +25% guideline, along with sales revenues growth accelerating in recent quarters.
What to Look For and What to Look Out For: Look for the stock to confirm a new technical buy signal by breaking out and closing above its $222.35 pivot point with gains on heavy volume in the coming days and weeks. It has rallied near that threshold, but remember that buyable breakouts require three important components: the stock must clear its pivot point with considerable gains, those gains must be backed by at least +50% above average volume, and the overall market environment must improve and produce a new batch of leadership.
On Thursday, March 20, 2008 the market confirmed its latest rally attempt which helps means the environment conducive for accumulating shares again. As always, it is of the utmost importance to sell a stock if it drops 7-8% below your purchase price. This high-ranked leader should remain on an active watchlist and could be considered as a new buy candidate in the event it closes above its pivot point on the necessary volume needed to trigger a technical buy signal. Any failure and damaging losses leading to a close back under its 50-day moving average (DMA) line would raise concerns and trigger technical sell signals.
Technical Analysis: MA technically enjoyed its second best close ever and remains perched just below its pivot point. Chart readers may note that during the market's steep January correction MA pulled back and found support near last year's highs in the $174 area, and stayed well above its longer-term 200 DMA line. The stock has spent the past four months building its latest base, and now there is little resistance remaining from overhead supply. Healthy action is also demonstrated by the gains on its three most recent weeks that were marked by above average volume. The stock is currently trading just -3.0% shy of its all-time high and has enjoyed healthy gains since its IPO in May 2006.
MICROS Systems: MCRS
MICROS Systems, Inc. designs, manufactures, markets, and services enterprise information solutions for the hospitality and specialty retail industries. Its enterprise solutions comprise hotel information systems, restaurant information systems, and specialty retail information systems. T
he company also provides system installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, credit card software support, systems configuration, network support, and professional consulting services, as well as software-hosting capabilities. In addition, it sells spare parts, printer ribbons, paper, printer cartridges, other consumable media supplies, network products, and printers through direct sales offices, dealers, and distributors, as well as telephone and POS depot. MICROS Systems operates in the United States, Europe, the Pacific Rim, and Latin America.
The company was founded in 1977. It was formerly known as Picos Manufacturing, Inc. and changed its name to MICROS Systems, Inc. in 1978. MICROS Systems is headquartered in Columbia, Maryland. MCRS sports a strong Earnings Per Share (EPS) rating of a 96 and a very healthy Relative Strength (RS) rating of 94. The company has managed to increase its earnings by above the +25% guideline in the past few quarterly comparisons versus the year earlier helping satisfy the C criteria. Steady years of strong earnings increases satisfy the A criteria. The number of high ranked funds have increased from 164 in March '07 to 173 in December '07 which helps satisfy the I criteria.
Return on equity is 19%, above the 17% guideline. However, MCRS resides in the Computer - Integrated Systems group which is currently ranked 94th out of the 197 Industry Groups covered in the paper, placing it outside the much preferred top quartile. Strength in other similar stocks in the group would be a help for it to satisfy the L criteria and overcome this shortfall.
What to Look For and What to Look Out For: Look for MCRS to trigger a technical buy signal, which could come if it rallies and closes above its pivot point with gains backed by at least 1.56 million shares. Volume needs to be at least +50% above average behind considerable gains to trigger a proper technical buy signal - the high volume behind a breakout's gains is a critical sign of institutional buying demand (the I criteria) . It would be very encouraging to see MCRS trigger a technical buy signal and continue rallying to fresh highs on heavy volume in the days and weeks to come. However, if volume fails to meet the minimum guidelines and the stock does not trade above its pivot point then a proper technical buy signal would not be triggered. Its 50-day moving average (DMA) line is the next nearby support level of importance chart-wise, and violations would lead to further downside testing. Avoid chasing this issue above its maximum buy price of $38.11, where it would be too extended from a sound price base. As always, it is of the utmost importance to sell a stock if it drops 7-8% below your purchase price.
Technical Analysis: Since its big gap up gain on 10/26/07 with heavy volume, Micros began building its latest base. During the 5-months it consolidated a very healthy advance, and the stock exerpienced a sharp sell in January when the broader market tanked. It sank under its 200-day moving average (DMA) line, but it stayed well above its June 2007 lows and soon recovered above its important longer-term average with gains backed by very heavy volume. Its 2/01/08 gap up gain was a sign of heavyy institutional buying demand (the I criteria) during its base building process. MCRS has recovered nicely and is currently perched -4.5% below its all-time highs. This is best illustrated by the stock's 94 Relative Strength rating and the fact that its relative strength line is leading the way into new high territory.
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