Monthly Specials (October 2024) - Part 1
Monthly Specials (October 2024) - Part 1
Stock ideas selected through a blend of qualitative analysis, fundamentals, and technical setups
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Hello, reader!
Thank you for taking the time to explore my blog. Welcome to my very first "Monthly Specials" post! Each month, I’ll be sharing handpicked stock ideas for swing trades and/or long-term investments, focusing on growth and quality companies that catch my eye. These picks are based on a blend of qualitative insights, fundamentals, and/or technical setups analysis.
I want to highlight three stocks that stand out and may present good opportunities starting October 2024. Let’s dive in!
Zoetis - ZTS 0.00%↑
Technical setup
50-week MA flattening out and starting to curve up as price push higher
Stock price attempting to break a strong resistance level, 195$-200$, from its base (blue curve) which started to form right after the downfall of the Covid-2021 peak.
MACD with the positive divergence from 2022 and now going above the zero line as it builds upward momentum.
Key Valuation metrics
9 EV/Sales (NTM) vs 10.1 EV/Sales (5Yr Avg)
22.1 EV/EBITDA (NTM) vs 23.5 EV/EBITDA (5Yr Avg)
23.8% ROIC vs 23.3% ROIC (5Yr Avg)
FCF Margins and FCF/Share improving substantially since the 2022 bottom while price consolidates
Commentary
Opportunities ahead (animal health market expected to grow at 5% CAGR for the next 10 years) and new potential multi-billion emerging markets (renal, cardiology, allergies) for this pharmaceutical leader with pricing power and a moat in intangible assets (Patents, Brand, Scale).
Source: Zoetis Investors Presentation (September 2024)
🧠FINAL TAKE:
Quality stock trading below its 5Yr Avg valuation and consolidating, while key metrics for future price appreciation like FCF/share or FCF Margins keep improving.
Good opportunity for both, long investment or swing trade, at these levels based on fundamentals and technical setup.
Otis World - OTIS 0.00%↑
Technical setup
50-week MA in a steady upward trend.
Price above the 50-week MA and the stock is building a new base in the 90$-100$ range within a bigger cup and handle pattern.
MACD starting to curve up and about to cross over after a multi-month consolidation.
Commentary
New policies from China, released earlier this week, could boost housing demand—a key market for them—which bodes well for this "boring" elevator manufacturing leader, especially with its growing recurring revenue from maintenance and related services.
🧠FINAL TAKE:
Quality company, under-the-radar with increasing recurring revenues from maintenance and related services.
Good opportunity for a swing trade, at these levels based on technical setup and new China policies.
Cloudflare - NET 0.00%↑
Technical Setup
50-week MA slowly rising while upward momentum is building, though consolidation continues as it nears resistance.
MACD: Very tight since June 2024, typically signaling an upcoming strong momentum move.
Volume: Steadily declining since the sharp increase during the AI peak.
Stage Analysis: Following Stan Weinstein's Stage Analysis, the stock appears to be in an early Stage 2 phase, which has been playing by the book so far, supported by a rising 50MA, a tightening MACD curve, a retest of the previous mid-$60s resistance level now acting as support, and decreasing volume following the transition from Stage 1 to Stage 2.
Key Valuation Metrics (NTM)
14.9 EV/Sales | 149 EV/FCF | 78 EV/EBITDA
Rule of 40: Revenue Growth + FCF Margin = 43.3%
Although revenue growth has slowed down to +30%, a key factor supporting premium valuation at 149 EV/FCF and 78 EV/EBITDA (NTM) is its rapid FCF margin growth recently.
Following the volatility of the Covid era, the relative stability in price trend has allowed FCF per share to improve significantly.
The Rule of 40 (Revenue Growth + FCF Margin) stands out at 43.3%.
🧠FINAL TAKE:
Improving FCF margins at a faster pace than revenue growth slowdown, and FCF/share has seen significant gains, supporting its premium valuation.
As we enter the AI era and anticipate potential Fed rate cuts, I believe the stock presents a renewed opportunity for long-term investors— not without risks.
Stock appears to be in an early Stage 2 phase, which has been playing by the book so far, and presents a potential opportunity for swing traders.
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