Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Perry: A Heart-Felt Buy
12/12/2003 12:00 am EST
One of the most promising areas of growth involves cutting-edge products and treatments designed to address cardiovascular disease," says Bryan Perry, editor of The Tactical Trader. "Treating this booming population of patients is fueling strong growth, and we are going to buy a hot medical device stock." Here's his pick.
"We are recommending going long shares of Endocardial Solutions (ECSI NASDAQ). The firm manufactures and markets the FDA-approved EnSite System used for the diagnostic mapping of arrhythmias (abnormally rapid heartbeats caused by irregular electrical activity in the heart) with a 3-D graphical display of the heart's electrical activity, and the navigation and localization of conventional catheters (diagnostic or therapeutic) used during electrophysiology procedures.
"The company reported record net third-quarter revenue of $9.7 million for the period ended Sept. 30, an increase of 76% over the year-ago period. The net loss for the period was $879,000, or 4 cents per share, compared with a net loss of $3.1 million, or 19 cents per share, for the same period of 2002. Revenues are expected to rise 40% in 2004 to $50 million according to the three analysts who cover the stock. Basically, this company has just proven that their business model works.
"From a technical standpoint, the stock broke out of a four-month base at $5 on their better-than-expected earnings announcement. After trading as high as $7.90, the stock is backing off. Money flow into the stock is strong and momentum indicators show the shares poised to move higher over the near term, setting the stage for a strong rally phase. The stock's trajectory shows that shares are on their way to $9 as a first objective and then $11, which is our price target."