Compass: Insiders Point to Gains

10/18/2016 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest breakout stock — based in Westport, Ct. — is an investment firm with holdings in diversified firms in North America, explains Leo Fasciocco, technical analyst and editor of Ticker Tape Digest.

Compass Diversified Holdings (CODI) acquires and manages a a group of middle market businesses that are headquartered in North America.

CODI provides public investors with an opportunity to participate in ownership of companies, which have historically been owned by private equity firms, wealthy individuals or families.

The company — with annual revenues of $864 million — seeks to purchase businesses at values that are accretive to its shareholders.

CODI's long-term chart shows the stock climbing from $7 back in 2009, the bottom in the prior bear market to an all-time high of $19.84.

The stock then drifted lower until earlier this year. Now it has turned up. It is in position to make a new high. It has a beta of 0.89 versus 1.00 for the stock market.

The stock climbed from $15.50 in May to a peak near $17.50 by August. Technically, it formed a flat base and has now cleared an 11-week flat base.

Analysts are forecasting a profit of $1.40 a share this year compared with a loss of 7 cents the year before. The stock sells with a price-earnings ratio of just 12.

Net for the upcoming third quarter should surge 149% to 40 cents. Looking ahead to the fourth quarter, analysts predict net of 46 cents a share.

CODI tends to come in under Street estimates. So, the stock needs to be watched closely. Going out to 2017, they look for a 24% rise in net to $1.74 a share from the anticipated $1.40 this year.

Meanwhile, one can see steady and heavy insider buying in recent months. The latest buying was at $17.

CODI is a speculative breakout play, but we are impressed by the heavy insider buying. We are targeting the stock for a move to $21.50. A protective stop can be placed near $16.30.

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