Great traders and true value investors know that it’s not only the return function that dictat...
Perry's Profits: A "Vital" Opportunity
07/29/2005 12:00 am EST
The Tactical Trader, from Bryan Perry, is not designed for long-term investing. Rather, it caters to more sophisticated traders looking for short-term profit opportunities that may last for just a few weeks. Here's his latest, a company with a "vital" role in disease screening.
"We are smack-dab in the heart of earnings season, with technology and biotech leading the way on the back of some blue-chip upside surprises. I feel like we are going from a broad-market upward move to a very stock-specific kind of market, where far fewer names would actually continue to push higher. In other words, stock-picking takes over from here. I also look for money to rotate into safer, less-cyclical sectors of the market-namely healthcare- while the market consolidates the recent gains during the next 45 days. At this point in the rally, we should see money move into some of the medical device/software stocks that are the leaders in their respective industries. One such company is Vital Images (VTAL NASDAQ), which I am adding to our trading portfolio in advance of the company's earnings report.
"Vital Images provides enterprise-wide visualization
and analysis solutions for use in clinical diagnosis, disease-screening
applications and therapy planning. The company's primary software products
include Vitrea and ViTALConnect. Vitrea is a visualization product for
radiological and surgical applications. It provides image clarity, processing
speed and simplicity, and it allows clinicians to screen for disease, diagnose
less invasively and plan treatments. ViTALConnect gives clinicians the ability
to process, analyze, review, and distribute multidimensional medical images
securely over the Web, which includes the ability to measure, rotate, analyze,
and segment images with a PC using a Web-enabled browser. In addition, a
collaboration mode lets several physicians in different locations confer while
interacting with the same images in real time.
"The company surpassed first quarter earnings estimates by 133% and is expected to triple net earnings when it reports second quarter numbers on August 2. There have been four Wall Street upgrades on the stock during the past three months, and earnings per share are expected to rise 56% to 40 cents from 25 cents during the next fiscal year. The stock is currently trading at $18 and I have a $23 price target for the shares, representing a potential gain of 27% during the near term. From a technical standpoint, Vital Images has put in a nice flag formation off of a recent push to a new high and is now sitting right on its 20-day moving average. Money flow is very positive, and momentum indicators have recycled to where they are now back down in neutral territory. Volume has lightened up on this pause, setting up the stock for another strong move higher in the very near term. Buy the stock at market."
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