I run a series of momentum stock scans each market day, and my most profitable of these is my "TOP 3 HOT STOXX SCAN." This is the scan that lies behind our brand-new HOT STOXX LETTER This momentum system is designed to buy the 3 best stocks in the entire universe of stocks based on market cap (under $2B), low key valuation metrics, strong peer industry standards, strong sales growth, and, of course, strong price momentum over 3 time frames.
Our "TOP 3 HOT STOCKS SCAN" and the trading system that goes with it has an historical performance record of +158.3% average ROI per year for the past 7 years.
For the past couple of weeks, MDCA has shown up on this scan. Subscribers to the letter are now long the stock and are enjoying its recent breakout run. I believe this run is just getting started. Let's look at the numbers:
Company Name: MDC Partners
Market Cap: $592M (smallcap)
Profile: MDC Partners is a Canadian company does marketing, customer service management, branding, social media, and e-commerce management for mid and large size companies. They serve over 1700 clients worldwide. They operate on a "partner" model which allows their best talent to flourish entrepreneurially.
Analyst Support: a recent upgrade from Jefferies from Hold to Buy, and a raised price target from Wedbush. The "business services" sector has been super hot this earnings season, with 67% beating earnings estimates and 100% of companies reporting beating sales estimates.
Why I Like the Stock: in addition to showing up on my scans, I particularly like shares of MDCA here for the following reasons:
- shares trade at only 0.4x sales and only 12x free cash flow, suggesting a healthy balance sheet
- EPS grew 55% last quarter and are expected to grow +113% in 2018
- shares pay an 8% dividend which is very healthy
- institutions own 85% of outstanding shares and funds have been net buyers in recent weeks
- price popped higher out of a 5-month base in late June following an investor conference, suggesting strong demand
- price recently cleared new 9-month highs and are higher by 67% over the past half year
- MDCA carries a Zacks Rank of 2 (buy) and is estimated to beat estimates by 46% when it reports on August 3
The price chart below shows the breakouts we mentioned. We like shares up to $10.75 with a stop-loss under $9.50, and a 1 year price target of $18.
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Dr. Thomas K. Carr (aka "Dr. Stoxx")
Founder, CEO of DrStoxx.com and IXTHYSLetter.com
