Minimed Inc (Nasdaq:MNMD)
Jeffrey, I submit that Minimed Inc (Nasdaq:MNMD) is a buy, based on C-A-N-S-L-I-M principles.
My evaluation is as follows:
1. C = CURRENT QUARTERLY EARNINGS PER SHARE -- MNMD's current quarterly earnings per share are up a major percentage over the same quarter last year. The quarter ended 3/31/99 is up 63% over the same quarter last year.
2. A = ANNUAL EARNINGS INCREASES: LOOK FOR MEANINGFUL GROWTH -- MNMD's annual compounded growth rate of earnings is 145%.
3. N = NEW PRODUCTS, NEW MANAGEMENT, NEW HIGHS: BUYING AT THE RIGHT TIME -- MNMD designs, develops, manufactures and markets advanced microfusion systems for the intensive management of diabetes. In June, 1999, MNMD received FDA premarket approval for a system designed to provide continuous glucose monitoring for people with diabetes. MNMD is emerging from a five week price consolidation pattern and is within 2% of a new high.
4. S = SUPPLY AND DEMAND: SMALL CAPITALIZATION PLUS BIG VOLUME DEMAND -- MNMD has 30.3 million shares outstanding and floating supply of stock is 19.1 million. MNMD management owns 37% of the total outstanding shares. According to Daily Graphs (an Investors Business Daily service), MNMD has an A rating for accumulation/distribution, meaning that MNMD is under heavy accumulation.
5. L = LEADER OR LAGGARD: WHICH IS YOUR STOCK? -- According to Daily Graphs, MNMD is a leader in the Medical-Products Industry Group with a relative strength of 96 (out of 100) and an earnings per share rating of 98 (out of 100). MNMD has the highest earnings per share rating and the second highest relative strength rating in the group. The Medical-Products Industry Group has a group relative strength rating of 86 (out of 100).
6. I = INSTITUTIONAL SPONSORSHIP: A LITTLE GOES A LONG WAY -- According to Daily Graphs, 34% of MNMD's floating supply of stock (34% of 19.1 million shares) is owned by funds and banks.
7. M = MARKET DIRECTION: HOW TO DETERMINE IT -- All major indexes (DOW, COMPQ, SPX, NDX, etc.) are at or near their all time highs. All major indexes have broken out above price consolidation patterns. This is a BULL MARKET.
TECHNICAL ANALYSIS--
1. BREAKOUT FROM SOUND BASE BUILDING ZONE -- On July 9, price broke above a five week flat-base price structure. A flat-base price structure is usually as second-stage that occurs after a stock has advanced off of a cup-with-handle, saucer, or double-bottom pattern. MNMD formed a cup-with-handle formation between about February 1 and May 31. The best time to buy MNMD would have been on June 2, when it broke above the handle and closed at 63 1/4. Note that O'Neil defines a flat-base price structure as being at least 6 to 7 weeks in duration. MNMD's price consolidation pattern only lasted 5 weeks.
2. MACD BUY SIGNAL -- On July 2, MACD crossed over its signal line.
3. STOCHASTIC BUY TIMING SIGNAL -- Stochastic is overbought and heading sideways to down.
FURTHER COMMENTS --
I am concerned about three things, which could foreshadow a failed breakout:
1. The flat-base price structure was only 5 weeks in duration instead of 6 or 7 weeks as cited by O'Neil.
2. Volume on MNMD's breakout above the price consolidation pattern was light.
3. The Stochastic indicator for MNMD is over bought and heading sideways to down. This sometimes indicates that a stock is ready for a pull back. Note, however, that MNMD is over bought in an up trend. Stocks that are in an up trend may be over bought for weeks. I've seen stocks make big advances after becoming over bought.
Since there are concerns about the possibility of a false break out, if you take this trade monitor it closely and set a tight stop order. MNMD may need to consolidate a while longer before making a permanent break out.
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