Readers' Mailbox: Part 3: iStock’s Views On PVD, MPEL, EGT, FTR, XTEX And WAG

What do you think of PVD?

Administradora de Fondos de Pensiones Provida SA (PVD) is hovering a little above support at $70, and in this market, not completely breaking down is actually a good sign. If the Chilean private pension fund administration and related services provider's stock falls through the $70 floor, then its next level of support can be found at $66.

iStock believes the odds are PVD closing below $70 in the immediate-term are less than 50%. The stock should remain above the backstop. Pensiones Provida is already as far below its 20-day average as normal trading circumstances allowed in the last six months. Without a panic sell-off, iStock thinks $70 is the bottom for now.

From a fundamental point of view, PVD looks rock solid with strong margins, low debt, effective management and a decent yield of 4%.

While we don't suggest trading against the current trend, PVD is worth watching, and a hold if you already own  it.

MPEL and EGT  Please advise buy sell or hold. 

Regards

Arne

With the Chinese economy struggling, a company that makes its bets in Macau, as Melco Crown Entertainment Ltd. (MPEL) does, could see more pressure on its share price. MPEL's stock chart indicates that $11ish is a possible near-term bottom, but iStock would continue to watch the economic numbers out of China.

Their manufacturing results have registered recessionary reading for months on end. Europe is China's biggest trading partner and the continent is coming undone. iStock doesn't see the EU situation improving before it gets worse.

From an earnings and revenues point of view, MPEL is trading at 13.31 times 2013 estimates of 87 cents per share, representing 21% growth. However, the top line is expected to move forward by only 8.7%.

For our comfort level, we wouldn't be willing to pay more than 15 times earnings, putting a target of $13.05. With a P/E equal to its projected earnings growth of 21 puts a $18.27 price tag on the share price.

In December 2011, Melco Crown hit a low near $8.50. If China's economic slowdown persists, then a return trip to single digits is possible once again.

Entertainment Gaming Asia Inc. (EGT) is a penny stock trading under $1. The company owns and leases electronic gaming machines (EGMs) in resorts, hotels, and other venues primarily in Cambodia and the Philippines.

It's always been iStock's view that stocks that trade under $1 dollar are like options that don't expire unless the company goes out of business. It's a gamble and only warrants an investment where you are willing to lose most to all of your money.

With that said, shares are riding higher while tracking along a rising 50-day moving average and improving relative strength. As long as EGT stays on top of the 50-day mark, iStock would suggest holding on, just in case Entertainment Gaming Asia a successful penny stock story.

Is Hzu a stock worthy of hanging on too?

You can check out our view on gold and silver here.

A bottom fishing opportunity?   FTR

Thanks,

Jim

This chart says all you need to know until its pattern breaks. When Frontier Communications Corporation (FTR) is within a dime or so of its 50-day average, you sell. When it's 50-60 cents below the 50-day trend line, you buy. Until this routine changes, the trend is your friend.

If the pattern is disrupted on the upside i.e. FTR handsomely closes above its 50-day, it could fire up a short squeeze as 23% of its float (shares available for trading) are sold short.

It could be tough to light that fire though, analysts believe Frontier's earnings will remain flat and sales dip in the year ahead. If the short squeeze comes, take the money and run.

Two issues I would interested in your take on XTEX and WAG

Arne (not the same as the previous Arne)

Oddly, although Crosstex Energy LP (XTEX) describes itself as a natural gas company, its share price has tracked the price of oil more closely that the price of natural gas, which has benefited shareholders.  Natural gas has recovered somewhat, but is still considerably lower that where it was 12 months ago.

Right now, the world economy is getting squeezed by events in Spain, Greece, a slowdown in China, and other maladies. As a result, oil's price has spiraled downwards from 2012 highs, taking XTEX's share price with it.

XTEX moved under its 200-day moving average during Thursday's trading. If the price stays below $15.96, then there is a good chance, in our view, that Crosstex can revisit support and May lows in the neighborhood of $14.50.

We see XTEX as more of total return than growth play with its current dividend yield of 7.9%, provided, of course, that the dividend remains the same. The payout has been on the rise since falling from 50 cents in October 2008, to 25 cents in January 2009. However, if world events unfold as some of the doom and gloom types predict, Crosstex Energy's dividend history suggests the payout will get whacked.

Oh, and if the tax rate on dividends increases in 2013, as they are scheduled to do as of this writing, iStock would expect companies to reduce dividends and use the money to increase share buybacks; it's a wiser and more efficient way to enhance shareholder value.

Overall, iStock says oil will tell you where XTEX is going.

I am from Chicago where talking bad about Walgreen Co. (WAG) is a capital offense. The stock is at the very bottom of a rectangle of pricing that started in October 2011. Things could become more uncomfortable if WAG manages to print a close below $30. Then, the stock price is likely to shave off another 8% to 17%. Hopefully, for WAG owners, the price stays within the rectangle and works its way back to $32, and then $34.50, which has served as the top 90% of the time since late last year. Until Walgreen closes above $37, iStock is afraid WAG will continue to wiggle sideways.

The information in this article is iStock Analyst take on different stocks. It is not intended to be advice, recommendations or endorsements of any investment or investment vehicles. Investing involves risk and you should consult with a financial professional before investing any money.