I started accumulating KNDL today after following it for the last two weeks and digging into the numbers. As is my practice, I am posting this explanation of why I think KNDL is a great buy.
* The numbers for KNDL look great -- 100% or higher earnings and revenues growth on a year to year quarterly basis for the last four quarters.
* The company provides contract research services to pharmaceutical companies, and thus is positioned very well to ride the continuing biotech and pharmaceutical boom.
* It also has been in the lead on consolidating that industry sector by successfully buying other contract laboratories that immediately add to the bottom line. In fact, this is the main reason for the companies exceptional earnings and revenues growth.
* KNDL recently released new shares into the market to raise cash for more acquisitions. Interestingly, the market absorbed those shares without any real impact on the price, which has continued to go up.
* The company has a 95% growth rate with a PE of 52, a RS rank of 95, an EPS rank of 99.
* From a technical perspective, KNDL has just broken out of a five month base into new highs. I like to buy companies that have broken out of long bases on strong volume, and KNDL certainly qualifies. My goal is to catch such companies within 5% of the high (29.5) during the recent base. Using that criteria, KNDL is an exceptional buy at 31 or below, and should continue to be a good buy even above that price. (I picked up my initial shares today at 30 1/8.)
* KNDL's small float of only 4.8 million shares means that there is the potential for a lot of demand for a limited number of shares, which is a very good position to be in if you own some of those limited shares!
* KNDL has only 26% mutual fund ownership, which means it has enough institutional support to be legitimate. However, that leaves a lot of room for more institutional buying which, if it happens, should help continue to drive up the price.
* KNDL currently has a very strong U/D ratio of 2.2, an IBD timeliness rank of A (the highest), and a very strong accumulation/distribution rank of B.
* For those who like the CANSLIM investment strategy, this is a classic CANSLIM pick -- A breakout on strong volume from an extended base with high RS and EPS ranks.
-- Jim Wright
P.S. For the sake of disclosure, and so there is no future misunderstanding, I look for and buy stocks with great fundamentals and technical factors. If the technical factors turn negative, I will sell even though the fundamentals may still look good. Right now, however, the technical factors and the fundamental factors for KNDL are outstanding, and thus I'm buying with the expectation of significant gains. |
