In my weekly segment where I take a look at recent trade ideas from across the web and give some of my own picks, I’m keeping the focus on the Trump administration’s plans, gold, and a couple of tech picks.
1. Potential upside on Pointer Telocation (PNTR)
Pointer Telocation operates in the self-driving ADAS (Advanced Driver Assistance Systems) sector, which has gained a lot of interest in the past few months. But while the spotlight has shone on larger companies, this relatively unknown small-sized firm has been making progress in MAAS (mobility as a service) compared to its peers in the connected car space.
As such, it is relatively cheaper than the likes of Ituran and CalAmp but doesn’t fall short in promise. Pointer trades at a P/E of 10.6 and EV/EBITDA of 5.1, amounting to a P/E discount of around 10% and an EV/EBITDA discount of 30% versus Ituran and 13% and 50%, respectively, versus CalAmp.
In particular, a couple of catalysts could spark a bullish run for this stock according to Oztar advisors. First is the ongoing growth in the subscriber base, which is keeping pace with the company’s revenues and allowing margins to increase. Next is the continuing growth in the MAAS, Internet of Vehicles and Mobile Asset Management space that is having a positive impact on its valuation. However, currency fluctuations have negatively influenced the company’s numbers recently as it reports in U.S. dollars but sells in other denominations.
In my view, PNTR stock has an interesting chart and recent price action is bullish. It’s a low float stock so the momentum could well run on for the next several sessions. I would look to buy this with a limit order and make it a small bet since liquidity is low.
2. Kamada: Another underfollowed Israel-based company (KMDA)
Kamada is a small cap company from Israel that develops and markets specialty plasma-derived protein therapeutics. has one approved product for Alpha-1 Antitrypsin Deficiency on the market and has several interesting drugs in development with a few different partners.
Last November, the US FDA approved Kamada’s Biologics License Application for its anti-rabies immunoglobulin therapy for post-exposure prophylaxis. Prior to this, the company extended its GLASSIA agreement with Shire Plc to produce the product for the company until 2020 after which Shire can produce it then pay Kamada royalties. This should allow Kamada to make $237 million in revenue with a potential upside of $288 million.
Looking forward to this year, Kamada expects inhaled AAT in Europe to be settled and the rabies drug to be approved in the US. Its recent earnings came in line with expectations, although the stock remains cheap at 1.5x projected 2017 revenues.
This is another low float security with some gappy price action. I would wait to pick this one up on strong support rather than look for a breakout trade.
3. Legal troubles to drag Straight Path Communications lower? (STRP)
Straight Path Communications is under the microscope with a regulatory crackdown, a pseudonymous short seller in 2015 accused the company of fraud. The FCC has since started an investigation but Straight Path greed to pay up to $100 million over time, surrender many of its licenses, and sell its entire remaining spectrum portfolio to settle matters.
This sparked a brief rally for the stock but there’s good reason to believe that it remains overvalued. According to analysts Kerrisdale Capital Management. The company is worth far less than its current market cap and its competitor, Verizon, is set to buy a similar amount of higher-quality spectrum for $200 million. This is 61% lower than the price of Straight Path, signaling plenty of downside potential even before FCC penalties are imposed.
STRP sounds like a good short and recent price action is bearish with the stock failing to close near it’s highs. I feel that the stock could carry on lower but there is potential for more squeezes so trades should be kept short in duration.
4. Potential Short Squeeze Coming in GoPro (GPRO)
The trade ideas team picked a good trade last week when they called out FCX as a washout trade. This time they are looking at GPRO and highlight the possibility of a short squeeze. The stock has shown signs of hitting a bottom over the past few weeks and if the stock breaks out from here, bears could well throw in the towel. The trade ideas team suggest waiting for the stock to breach 9.61 before going long. Stops should be kept below 8.5.
This looks like another interesting trade with the share price hovering right near the level. I am keeping my eye on this one. You can sign up for the Trade-Ideas trade of the week here.
5. Make or break for Seabridge Gold (SA)
Seabridge Gold shares are in a steady downtrend but price has since pulled up to retest the descending trend line connecting the latest highs of price action. Now a lot could hinge on how the precious metal fares in the coming days, with a slight upside bias on market uncertainties stemming from Trump’s administration, but the longer-term downtrend remains intact for now.
Price is consolidating around the $10 level for now so a bit more bearish momentum might be enough to confirm that the overall selloff is poised to resume. On the other hand, a move past $10.50 could be enough to confirm an upside break and potential reversal from the decline. I am leaning towards the former as I think the gold price could have a pause. I’d be looking for a short around $12, quite a way from here.
6. Gold sets sights higher after Trump inauguration
Several market analysts have upped their forecasts for gold prices as risk-off flows were seen after Trump’s inaugural address. After all, the new US President decided to focus on a populist message instead of delivering a pro-growth speech that would underscore the Fed’s progress towards stronger economic growth and higher interest rates.
From a technical standpoint, Larry Edelson pointed out that an extended short-term cycle low back in December would likely be followed by a rally. From there, the precious metal could extend its climb to $1,350-1,400 before another correction takes place. Among the factors keeping gold propped up are the investor jitters in the US markets, fears of a trade war, tensions between US and China, the refugee crisis in Europe, and uncertainties brought forth by the looming Brexit negotiations.
I am beginning to like gold on a medium-term horizon but think it could pullback on the short-term. I fancy a short position in $GDXX, a leverage ETF that tracks gold miners.
7. Soros warns uncertainty could hit global market gains
In keeping with the gloom and doom mood after Trump’s inauguration, trading legend George Soros was able to predict that the post-election rally back in November would likely be wiped out after the new president officially takes office. Indeed dollar price action was shaky after the event while Asian and European markets were off to a wobbly start for the week, primarily due to fears of trade wars between the US and its trade partners.
For one, Trump has spoken about withdrawing from the TPP and renegotiating NAFTA, under which Mexico and Canada send and receive products from the US with virtually no tariffs. Trump’s feelings about Mexico aren’t exactly a big secret but scrapping NAFTA could mark the tip of the iceberg when it comes to strained relations with Canada.
“Right now uncertainty is at a peak,” Soros said in an interview with Bloomberg. “And, actually, uncertainty is the enemy of long-term investment. So I don’t think the markets are going to do very well.” Keep in mind, however, that there may be some bitterness with this statement as Soros lost nearly $1 billion in his personal account when the stock markets surged after Trump’s victory in November. Soros noted that the rally was simply spurred by expectations of fiscal stimulus and tax reform but that Trump will have a tough time getting these changes through Congress, thereby keeping uncertainty in play.