Whenever it comes to buying a stock I always let technical
analysis make my final decision. However, since I know everyone invest in their
own way I am going to bring a stock to your attention that I am looking to take
a large position in sometime in the future.
This stock is Natural Gas Services Group Inc (NGS). Not only
is the name of the company nice enough to draw investor interest the
fundamentals in this stock has it prepared to make large gains. Now, of course
all of this depends on its business model not coming under tremendous
competition.
Now while too many people focus on the wrong mettics when hunting for stocks I
always focus on what matter to make the stock make the big gains. CANSLIM.
The C is for current quarterly earnings and those are taking off with EPS
growing 67%, 27%, 29%, 120%, 40%, 58%, and 32% the past seven quarters. If that
is not your idea of strong growth, I am not sure what is.
Those earnings are expected to continue with the A for
annual earnings growth having estimates for 2008 for a gain of 18% and a gain
in 2009 for 26%. That shows plenty of growth the for me..
The N deals with the stock hitting new recent 52-week highs.
This shows that the stock is under heavy demand as the stock is nearing high
ground proving the strength of the stock. If you notice stocks that trade
around $1 never hit $10. While stocks that trade from $10 to $25 normally make
it to $50 when the sales and earnings are growing.
When it comes to the S of my checkup this stock gets a huge
pass as its group relative strength based on IBD puts it in the top 6% of all
stocks with a 94 group RS rating which means it is the 12th
strongest industry group to the other 197. So the strength of the group is
there with stocks like GTLS FTI WFT NOV and LUFK.
And with it being the second strongest stock in the group,
after GTLS, based on EPS, ROE, sales, and debt means that you can’t have much
better a stock in a group with such a favorable industry background behind it.
One of the most important things I look for in stocks that I
am buying based on top quality fundamentals is to make sure mutual funds are
also buying the stock. If you noticed GA and PFWD had very solid fundamentals
but both turned down after the China
earthquake. Nothing hinted that these stocks would crater except both stocks
showed a slowing number of funds accumulating it (basically they were selling).
They definitely are not selling this stock as NGS holders have increased from
18 to 22 to 27 the past four quarters. There was no growth the most recent
quarter but at least it did not fall.
The last decision before I go long a stock I love with great
fundamentals is to make sure the sector has a positive reason to rise.
Obviously, with the US
refusing to drill and build more refineries the long term looks up for this
company.
This is definitely a stock I would love to get very long on
a bounce off the 50 DMA or a breakout to a new high above the recent handle.
However, nothing says you couldn’t go long now.
This is a top quality stock with only 8% debt.
Disclosure: no positions in NGS yet.
