At the beginning of every week a I run a stock scan, looking for a strict combination of technical and fundamental cues. The point isn't as much to tell me which stocks to blindly buy, but rather, to show my some (preferably small) budding names that I might not have found otherwise. The good news is, the approach usually works well, and finds me good picks anyway. This week's results showed me Cadence Pharmaceuticals, Inc. (NASDAQ:CADX), Buffalo Wild Wings (NASDAQ:BWLD), and Cherokee Inc. (NASDAQ:CHKE) as strong candidates. Though these threes three names certainly weren't the only possibilities my trading system dug up, BWLD, CHKE, and CADX were among the best of the best once a put all those stocks through the 'human eye' filter. Here's a closer look.
Shares of Buffalo Wild Wings - yes, the chicken wing joint - popped back above their 200-day moving average line (red) last week after spending several weeks underneath it, and struggling to make any forward progress for a while when it finally started to press into that long-term indicator line. Now that BWLD has cleared the hurdle, bullishness will be much easier to muster.
If you really want to see something compelling though, take a look at this bigger chart of BWLD. Although the stock's been more down than up following the early-2012 jump, the earnings-growth trend has been amazingly reliable. The pros say 2012's per-share income of $3.06 will be $3.58 for 2013 and $4.29 by 2014. Given what we've already seen from Buffalo Wild Wings for years now, that's an outlook that's easy to believe... the company's already growing at that pace. It's not a cheap stock at 26.6 times trailing income or 19 times its forward-looking income, but sometimes quality is worth the premium.
Cherokee Inc. made a move similar to the one Buffalo Wild Wings made, meaning it had been struggling to make the next (and tougher) bullish leg of its rebound effort. As of last week, though, the strong surge carried CHKE over that key hump... the 100-day moving average line. The fact that the stock's also been using a long-term (and rising) support line (dashed) as a pushoff point only makes this effort that much more believable. Again, however, it's the bigger chart that really makes this near-term breakout move so exciting.
You may have to squint to see it, but CHKE is finally growing its bottom line again. The company has booked a profit of $0.87 for the past twelve months, ending 2012 a little stronger than how it ended 201 (when it earned $0.70 per share). It's small, but all big trends start out as small ones. Cherokee Inc. is also plausibly positioned to earn $1.02 this year... a 17% improvement that makes the trailing P/E of 16.6 a fair value.
Last but not least, Cadence Pharmaceuticals, Inc. may not be profitable - nor expected to be anytime soon - but that doesn't mean the market's not going to reward the progress it's currently seeing from the biotech company. Sales have grown from nothing in 2010 to $16.7 million in 2011 to $38.9 million for the past for quarters combined. CADX has also increased revenue and decreased its loss for four straight quarters, with more of the same growth in the cards as sales of its injectable acetaminophen drug Ofirmev continue to expand. It's been beating sales projections for a while now.
It's the timing of the entry that makes CADX such a great idea for newcomers though. Since the middle of 2012 we've starter to see higher highs and higher lows from this chart. But, as of this week following the modest brush of the 100-day line and immediate bounce up and off of it, there's little doubt as to the direction of the undertow for Cadence Pharmaceuticals here. Indeed, the February lull looks like a prefect 'buy on the dip' scenario.