Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
Market View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq traded relatively flat this week, consoli-
dating the last two weeks of gains. The S&P 500 now has four distribution days with two expiring next week,
while the Nasdaq has six distribution days with three expiring next week. Leading ideas continue to show con-
structive action with multiple ideas hitting new highs despite sideways trade in the major averages. Earnings will
continue to play a big role over the next few weeks, driving market direction. Thirty-percent of the U.S. Focus List
reports next week, followed by 25% the week after. We maintain our positive view on the general market due to
a declining distribution day count and good technical action in the major averages and leading ideas alike.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 68 ideas gained 0.9% on average this week, outperforming the S&P 500 (+0.02%) and the
Nasdaq (-0.07%).
Actionable Focus List ideas: Activision Blizzard ( ATVI ), Arista Networks ( ANET ), Calavo Growers ( CVGW ), Dia-
mondback Energy ( FANG ), Fleetcor Technologies ( FLT ), Global Payments ( GPN ), Home Depot ( HD ), RingCentral
( RNG ), SS&C Technologies ( SSNC ), Unitedhealth ( UNH ), Worldpay ( WP )
USFL ideas weekly earnings line-up:
Monday: Close: GOOGL, ZION
Wednesday: Open: FLIR, GRUB, MKTX, NEP; Close: ALGN, MPWR, NOW, PYPL, V, VRTX
Thursday: Open: ABMD, MA, TAL; Close: AMZN, EW, SIVB, TEAM
Friday: Open: TYL
By Sector
Health Care ideas on the U.S. Focus List led this week. IDXX, ILMN, ALGN, PRAH, EW, and VRTX are all trading
at or near new highs. UNH pulled back post earnings, but found support at its 50-DMA. Banks also did well this
week, though most just held the lower end of support levels and are now attempting to build the right side of
new bases. TCBI and WAL reacted positively to earnings, while ZION and SIVB both report next week. After two
solid weeks of gains, Software ideas held up well with a handful moving back into new highs. ATVI, RNG, and
SSNC provided new buy points after breaking out of new bases, while RP and PAYC both regained their respec-
tive 50-DMA. Conversely, Energy ideas have lagged over the last few sessions. FANG remains above its 50-
DMA, however, WRD and CLR are now trading more than 10% off highs and around their respective 100-DMA.
Home Depot
Key points:
The stock has broken out of a 24-week cup-with-handle base.
The stock has a high EPS Rank of 91, aided by FY 2015–2018 EPS CAGR of 17%. Earnings stability factor is the best, at 1, indicating the Company’s consistent performance.
During this period, pretax margin improved from 12% to 14%.
RS Rating of 84, A/D Rating of C+.
Ipca Laboratories
Key points:
The stock is constructively building the right side of a 10-week flat base. We recommend buying shares here in anticipation of the stock clearing above resistance at ~INR 760.
Technical ratings: RS line is at a new high, RS Rating 90, and A/D Rating A-.
Fundamental ratings: EPS Rank 63, SMR Rating C, and Composite Rating 90.
Market View
Market Overview :
The U.S. market is in a Confirmed Uptrend. The S&P 500 is now trading just 2% off highs, while the Nasdaq
made a new all-time high after finding strong support at the 50-DMA last week. Distribution stands at five days
on the S&P 500 and four on the Nasdaq, with one day expiring on the S&P 500 at the close next Wednesday.
Leading ideas showed very strong price action this week, with more than 25% of the U.S. Focus List hitting a new
all-time high. We recommend buying high relative strength ideas across leading and/or improving industry
groups at risk-optimal entry points.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 68 ideas gained 1.5% on average this week, in line with the S&P 500 (+1.5%) and underperform-
ing the Nasdaq (+1.8%).
Actionable Focus List ideas: Activision Blizzard ( ATVI ), Alphabet ( GOOGL ), Arista Networks ( ANET ), Calavo
Growers ( CVGW ), Diamondback Energy ( FANG ), Edwards Lifesciences ( EW ), Fleetcor Technologies ( FLT ), Global
Payments ( GPN ), Home Depot ( HD ), Nextera Energy ( NEP ), Paypal ( PYPL ), PRA Health Sciences ( PRAH ),
RingCentral ( RNG ), SS&C Technologies ( SSNC ), Vertex Pharmaceuticals ( VRTX ), Worldpay ( WP )
USFL ideas weekly earnings line-up:
Monday: Close: NFLX
Tuesday: Open: SCHW, UNH
Wednesday: Close: TCBI
Thursday: Close: WAL
By Sector
Technology and Health Care ideas on the U.S. Focus List led this week. Within Technology, software led with
NOW, ATVI, CRM, TEAM, and ADBE all moving back into new highs. PAYC, RNG, TYL, VEEV, and ADSK all re-
gained their respective 50-DMA. Outside of software, GOOGL is actionable after breaking out of consolidation
and back into all-time highs. Within Health Care, five of our nine ideas made new all-time highs. ILMN, IDXX,
and PRAH continue to trend into higher highs, while VRTX just broke out on Friday from a 17-week cup. Payment
Processors also continue to act well, with PYPL, WP, GPN, MA, V, and FLT all trading at or near new highs. Con-
versely, Banks remain weak. WAL, ZION, and TCBI are all testing the low end of near-term support ahead of
their respective earnings announcements in the coming days. SIVB remains the leader, despite trading below its
50-DMA and ~10% off highs.
Ipsen
Key points:
The stock broke out of a 12-week consolidation into all-time highs on 1.4x average daily volume. We recommend adding to positions here. Support is at the rising 50-DMA. We would note that Q2 earnings results are scheduled forJuly 26.
Technical ratings: RS line is at a new high, RS Rating 92, and A/D Rating B+.
Fundamental ratings: EPS Rank 95, SMR Rating A, and Composite Rating 99.
Global Health Care Sector—Medical Devices and Equipment
Some highlights from the report:
U.S.
- We recommend an overweight position within Medical Technology as long as the iShares U.S. Medical Devices ETF (IHI) remains above its 50-DMA.
- The Medical Products industry group is ranked number 2 of 197 and remains the best performing industry group within Health Care.
- The current 68 profitable companies above $500M in market cap within the Medical Product and Equipment industry groups have a five-year EPS median growth rate of 13% and a five-year median (high-to-low) P/E ratio range between 16 and 42. Over the next year, consensus calls for similar growth and valuation. Next fiscal year’s EPS is expected to grow by a median of 13% with a P/E ratio of 27x.
- Top Picks: ABMD, ALGN, IDXX, ILMN, EW; Stocks of Interest: OMCL, GHDX
EMEA
- Health Care is outperforming over the last 26 weeks and improving over the last four weeks. Within the sector, the Medical Product and Medical Equipment industry groups are also outperforming over the last 26 weeks and improving over the last four weeks.
- Top Pick: STMN.CH; Stocks of Interest: ELKB.SE, BIM.FR
APAC
Market View
Market Overview :
The U.S. market is in an Uptrend Under Pressure. We are encouraged by strong price action and the decline in
distribution this week, but would like to see confirmation next week with bigger volume before we move the mar-
ket back into a Confirmed Uptrend. Distribution now stands at four days on the S&P 500 and five on the
Nasdaq, with one day set to expire on the Nasdaq next Thursday. We are also encouraged by the action of
leading ideas over the last few sessions. Though the majority of leadership continues to consolidate, multiple
ideas have been able to hold and move higher off short-term levels of support over the past week. Our recom-
mendation will be to buy high relative strength ideas at ideal pivot points should we see the major averages hold
these gains early next week and move higher on more convincing volume.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 68 ideas gained 1.9% on average this week, outperforming the S&P 500 (+1.5%), but underper-
forming the Nasdaq (+2.4%).
Actionable Focus List ideas: Activision Blizzard ( ATVI ), Alphabet ( GOOGL ), At Home ( HOME ), Calavo Growers
( CVGW ), Diamondback Energy ( FANG ), Fleetcor Technologies ( FLT ), Home Depot ( HD ), Nextera Energy ( NEP ),
Paypal ( PYPL ), PRA Health Sciences ( PRAH ), SS&C Technologies ( SSNC ), Unitedhealth ( UNH ), Vertex Pharmaceu-
ticals ( VRTX )
By Sector
Technology ideas across the U.S. Focus List recovered this week. QTWO, TEAM, SSNC, CRM, MPWR, PSTG, and
GOOGL all found support at their respective 50-DMA, while RNG, NOW, VEEV, and ADSK all regained that
same level. ON, ANET, PAYC, RP, TYL, and NVDA are still trading below their respective 50-DMA. Payment pro-
cessors also did well this week, with six of our eight ideas moving higher off 50-DMA support. SQ, FLT, and
PYPL are leading the group, while GPN and PAGS are lagging. Health Care ideas also remain strong, holding
up well on a relative basis during the market decline, and now beginning to move back toward highs. IDXX,
UNH, ILMN, and PRAH all found support at the 50-DMA, while VRTX is building momentum after last week’s
gap up and setting up to test all-time highs. Conversely, Banks on the list remain weak. TCBI, WAL, and ZION
are still trading around their respective 200-DMA, while SIVB has come 10% off its high and below its 50-DMA.
Vifor Pharma
Key points:
The stock is breaking out of an 11-week consolidation into all-time highs. We recommend buying shares here. Support is along the rising 50-DMA.
Technical ratings: RS line is approaching a new all-time high, RS Rating of 95, and A/D Rating of A-.
Fundamental ratings: Double-digit EPS and revenue growth expected over the next two years. SMR Rating of C. Composite Rating of 79.
Market View
Market Overview
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq are both holding support above
their respective 50-DMA after a sharp pullback earlier in the week. We are now looking for this level of support
to hold for the next few sessions before we recommend increasing risk in the market. Distribution also remains
elevated at six days on the S&P 500 and seven on the Nasdaq. Next week, however, two distribution days expire
on each index which would take the count back down to a more comfortable level. Lastly, we are still monitoring
the action of leading ideas which have come sharply off recent highs. We will be looking for new ideas to
emerge, while prior leadership consolidates. Our recommendation is still to remain patient here with a focus on
high relative strength ideas bucking the general market pullback.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 68 ideas (five net removals) lost 2.6% on average this week, underperforming the S&P 500 (-1.3%)
and the Nasdaq (-2.4%).
Actionable Focus List ideas: Activision Blizzard (
), Alphabet (
), At Home (
), Calavo Growers
(
), Continental Resources (
), Diamondback Energy (
), Fleetcor Technologies (
), Home Depot
(
), McCormick (
), Nextera Energy (
), Paypal (
), PRA Health Sciences (
), SS&C Technologies
(
), Supernus Pharmaceuticals (
), Unitedhealth (
), Vertex Pharmaceuticals (
)
By Sector
We did see early signs of rotation into Energy last week. This continued this week with
,
, WRD, and
all holding those gains despite the pullback in the market. Consumer Staple also came under accumulation
this week.
regained its 50-DMA and is now trading just 3% off all-time highs, while WTW and new addi-
tion
are both trading near new highs. Lastly, the two biotechs on the USFL,
and
, both broke
out and remain actionable at current levels. Conversely, Technology remains under pressure. The majority of
software ideas undercut short-term support levels and now need time to consolidate before presenting better en-
try points.
and RHT were both removed from our list due to severe technical deterioration, while PAYC,
ADSK, RNG, TYL, NOW, and RP all remain on the list, but are all trading below their respective 50-DMA.
Among software ideas,
does stand out positively with a relative strength line near new highs.
New Ideas or Deletions
We added McCormick (
) and removed Fedex (
), Splunk (
), Marvell Technology (
), MKS In-
struments (
), Morgan Stanley (
), and 58.com (
) from the U.S. Focus List this week.
