Weekend Update – A New Format

Nasdaq Composite 3-16-13

Nasdaq Recap

Nasdaq Composite 3-16-13

The Nasdaq Composite was up just 0.1% for the week on volume that was just a shade above average. After jumping out to a good start on Monday, it found distribution on Tuesday as it fell in slightly higher volume. It seemed to regain its footing on Wednesday and Thursday, but fell on weak economic news Friday. Volume on Friday was heavy due to options expiration, this logging another distribution day. While the Nasdaq didn’t move much higher this week, it didn’t give up any ground either. The two distribution days could become worrisome if we see a few more pile up in the next couple of weeks, but they could also just be a minor blip on the big picture radar.

Leading Stocks

12 stocks made my Follow The Leaders screen this week. Among them were the usual suspects including LAD, CELG, MDCO, LL, and LNKD. While all of the stocks meeting the fundamental criteria for this screen have strong earnings, LAD and LNKD are the clear leaders right now.

Lithia Motors (LAD)

Lithia Motors (LAD)LAD is currently extended from a second stage cup with handle base that it broke out of in December. Since that breakout, the stock has logged four weeks of accumulation and only one week of distribution.

In its most recent three quarters, LAD has reported earnings growth of 41%, 48%, and 54% as well as sales growth of 26%, 24%, and 26%. The fact that the company is increasing its earnings growth each quarter is particularly appealing. The company currently has a return on equity of 19%, fund ownership has increased slightly in each of the past four quarters, and it is in an industry group that is just inside our acceptable range.

Linkedin (LNKD)

Linkedin (LNKD)LNKD was up 0.4% this week on volume that was 13% calmer than normal. The stock is currently extended from a first stage cup with handle base that it broke out of at the beginning of January. Since that breakout, it has recorded six weeks of accumulation and no distribution.

In its most recent quarter, LNKD reported earnings growth of 192% and sales growth of 81%. Annual earnings are projected to grow by at least 50% in each of the next two years. The company’s return on equity is lower than we like to see at 13%, but it has almost doubled fund ownership over the past year, and its industry group is just inside of the range we look for.

Top Performing Sectors

Top Five Sectors

1. Office, 2. Media, 3. Transport, 4. Finance, 5. Building

Top Five Fidelity Sector Funds

1. Transport, 2. Air Transport, 3. Brokerage & Investment, 4. Biotech, 5. Energy Services

Top Five SPDR Sector ETFs

1. Aerospace & Defense, 2. Oil & Gas Equipment, 3. Transportation, 4. Oil & Gas Exploration, 5. Regional Banks

Stock Setups To Watch

Fleetcor Technologies (FLT)

Fleetcor Technologies (FLT)FLT pulled back 1.4% this week in volume that was 19% below average to form a three weeks tight pattern. While the three weeks tight pattern is generally a place to add to a position, not establish one, I included it because there are not many other setups to watch this week. FLT is well extended from a first stage cup with handle base that it broke out of in August. Since that breakout, the stock has seen 12 weeks of accumulation and only one week of distribution.

In its most recent quarter, FLT reported earnings growth of 46% and sales growth of 45%. Annual earnings are projected to grow by 21% this year. The company has a return on equity of 30% and has increased fund ownership dramatically over the past year, but its industry group has been performing terribly.

HCA Holdings (HCA)

HCA Holdings (HCA)HCA was up 1.8% this week in volume that was 9% below average as it formed the sixth week of a second stage flat base. The base has a pivot point of 39.60 and contains two weeks of accumulation and one week of distribution.

While HCA looks good from the technical side, its earnings are not strong. In its most recent quarter, the company reported earnings growth of -3% and sales growth of 9%. Annual earnings are projected to decrease 14% this year. Despite those numbers, fund ownership is increasing and it is in a top performing industry group.

Nuestar (NSR)

Nuestar (NSR)NSR dropped 0.1% this week in volume that was 12% above average, making this the third week of distribution in its five week long, first stage flat base. The base has a pivot point of 47.24. Bases with that much distribution are very concerning.

In its most recent quarter, NSR reported earnings growth of 47% and sales growth of 23%. Annual earnings are projected to increase by 10% in each of the next two years. The company has a strong return on equity of 36%, has increased fund ownership slightly in each of the past four quarters, and is in a solid industry group.