Priced to Trade

01/28/2005 12:00 am EST

Focus:

Price Headley

Founder and Chief Analyst, BigTrends.com

Price Headley offers a variety of online trading services, ranging from speculative options plays and short sales to longer-term sector and fund positions. Here's a glimpse into the variety of fundamental and technical considerations behind his picks.

"Among our stock positions, we now recommend buying Toll Brothers (TOL NYSE) at the market, with a target of 89. We’ve liked the homebuilders for a while, and Toll Brothers has the most compelling chart. However, the fundamentals are the most exciting part the forward looking p/e of 8.8 paired with revenue growth of 40% and earnings growth of 57% makes this stock a relative bargain within a booming industry.

“We also recommend buying Vicor (VICR NASDAQ) shares at the market. Our target is 18. The company makes modular power systems, which use high-frequency electronic power conversion technologies. Vicor has been quietly building momentum since October, after falling off of most people's radars due to the big loss taken in July. That dip, however, only created a bargain. Technically, our signal is the recent cross above the 200-day line, and while the target is a big one (up about 42%), this stock was trading even higher than our target price earlier in the year.

“We also recommend Nara Bancorp (NARA NASDAQ) at the market with a target of 25.65. Nara is one of those quiet opportunities in an industry that's being somewhat overlooked right now. These consistent incremental gains, though, can add up quickly. Revenue is growing at 23%, and the lack of analyst coverage leaves the door wide open for a flood of new bullish opinions when this regional bank is discovered.

“In our options portfolio, we like Apple Computer (AAPL NASDAQ) and recommend buying the Apple March 70 calls 5.30 or lower. Our target is 10.60 with a closing stop at or under 3.50. AAPL shares appear to be pressing on to new highs again, largely unaffected by the weakness most stocks saw early in the year. The underlying fundamental improvement justifies this bullish chart.

"In our swing trader portfolio for aggressive traders, we have two new positions. We recommend buying Beazer Homes (BZH NYSE) at the market. Our target is 172, with a closing stop at or under 136.99. All the homebuilders have shown recent strength, confirming the relative strength in the industry we've been seeing for weeks. Beazer is the most attractive in this group, as it hasn't yet had the big runup that most of these other names have. On the short side, we recommend selling short Union Pacific (UNP NYSE) at the market. Our downside target is 47.01, with a closing stop at or over 62.30. Union Pacific crossed under the 200-day line a couple of days ago, and is on track to make an even lower close today. The entire transportation industry is suffering, but after being overbought for so long, that's not a major surprise. These stocks still have a lot of correction to go."

“We rounded out our fund portfolio by adding the Fidelity International Small Cap Fund (FISMX) at 23.47 per share. And since then, it’s been our sole bright spot. The net asset value hit a new 52-week high of 23.57 just yesterday. That’s precisely why we wanted to pick up some foreign exposure; these stocks are not suffering the same ‘fat’ that US stocks are. In fact, foreign markets may be benefiting from the demise of domestics stocks, as investment dollars are flowing into the more promising overseas markets just as quickly as they’re taken out of North American stocks. The longer that US stocks lose ground, the higher we’ll see our international fund move.

“As for the rest of our fund positions, they've done about as well as you'd expect in the midst of a market-wide correction and we want to keep holding Fidelity Select Industrial Materials (FSDPX) and Fidelity Structured Large Cap Value (FSLVX). The international funds purpose is clear, the large cap value is well suited to resist pullbacks, and the materials fund will benefit as inflation pressures push basic materials prices higher and improve the bottom lines for materials companies."

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