This stock, says advisory service, could be a 'potential double'
"Holly Corp. (HOC), an independent petroleum refiner, gave a solid 'Buy' signal a little over two months ago and appears poised to continue moving a lot higher," suggests Mike Turner, editor of the newly-launched advisory service, Mastering the Markets.
"Holly Corp. is my top-ranked 'Doubler' -- my list of stocks with the potential to double in price. With regard to HOC's fundamentals, I like the following:
Following, are some of Mike Turner's key points, excerpted from his letter:
- First, Holly has delivered impressive year-over-year earnings growth of +34.8%. I also look at multi-year (3 to 5 years) average earnings growth, as this tells me if a particular company has long-term staying power. In this case, HOC has delivered exceptional five-year average earnings growth of +25.7%.
- One way to judge a company's health is to look at its return on equity. The higher this number, the better. In this case, HOC sports a very strong ROE of 26.1%.
- Knowing a stock's price/earnings ratio (P/E) is important, but it's not nearly as important as knowing how that P/E stacks up against the stock's peers. With a P/E of 10.2, HOC is reasonably valued relative to its peer group.
- When I can get a decent dividend on a stock, I consider it a bonus. In the case of HOC, its annual yield is 2.2%.
- In addition, I want all the financial 'stars' aligned when I buy a stock. This means I want the fundamentals and technicals to be strong. However, it is also critically important to monitor the Industry and Sector.
- Because I believe that over half of the reason why a stock moves higher or lower can be tied to its Industry and Sector, I always want both to be moving in a very bullish direction.
- My system calculates the average price of every stock in each Industry and each sector. I want to own stocks when the 'rising tide' is lifting all boats. In this case both the Industry (Oil and Gas Operations) and Sector (Basic Materials) are in 'Bull-Mode,' which is very positive for HOC.
- Further, I use my own set of technicals to determine the very best time to enter a trade. I use fundamentals to tell me 'what' to consider buying, but I use technicals to tell me 'when' to buy.
- Technically, I divide each stock's three-year price chart into four distinct Zones. Each Zone is 25% of the three-year total range or volatility. In general, if an equity is in Zone 1, it is in the lowest 25% of its three-year price range. Zone 4 is the top 25%.
- I rarely short an equity that is in the lower half of Zone 1, but if I can find a stock that is in Zone 1 and has the fundamentals and/or technicals to support a climb back up into Zone 4, then it becomes a candidate for possible inclusion in my Doublers List.
- In this case, HOC is trading in Zone 1, and the stock could double in price without even reaching its previous highs.
- In general, the more shares that are traded per day, the more liquid the stock. For market timers like me, liquidity is extremely important. I want to be able to get in and out of a stock at the price I want, and I don't want a small handful of traders pushing the stock's share price around.
- As such, when I am looking to get into a new position, I seriously consider both the average daily volume of shares and the trajectory of investor interest in the equity. I like to see a stock rise on increasing week-over-week trading volume.
- In the case of HOC, the stock's trading volume, as well as the rate of increase in week-over-week volume, are both very positive. The stock is currently trading around $27 per share, and could easily move back up above $60."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.