I took a week off because last week, I had to send in my computer to get fixed and so I didn’t have my usual analysis/charting scripts (forgot to put them somewhere centrally accessible before sending it off).
But in a sense, I’m pretty glad I did skip a week. the market was pretty bloody last week, and today was no better.
On the negative side, Perficient, Inc. (NASDAQ: PRFT) wasn’t immune to that, especially today. I still believe in their fundamentals so I’m hanging on, but they were definitely hit by this whole market drop.
But on the positive side, my pick for today is in a far more desirable position. I was fearing it was getting a bit too high, too fast, but it was knocked down considerably this last week to a more attractive valuation.
So let’s jump into it.
Previous Pick: [quote symbol=”PRFT” attribute=”companyName”/] (NASDAQ: PRFT)
- Loading stock data...
Like I said above, PRFT had a good run-up despite the volatility in the market. Up to last Wednesday, it ran up to $53.15, but then dropped off significantly towards the end of last week, closing out at $50.59 on Friday.
Does that mean it’s done? In my opinion, no. It is still listed as a Zacks Rank #2 (Buy), with a price target of $57. I still definitely like it for all the reasons I mentioned.
But I think the make-or-break will be the earnings report before market open tomorrow (2/25). If it misses, then it could definitely drop, but it’s just too hard to tell at this point. I’ll reevaluate after earnings and seeing how the market responds.
I’ll leave this here for now because there’s just not much to say about it. If you’re holding a position, I’d say to wait it out until tomorrow and then see what happens from there. If you don’t hold a position yet, I’d say to also wait until tomorrow before opening up a new one.
If you want to receive my specific guidance on this and other stocks, I suggest my new portfolio service I’m opening up, which I’ll discuss at the end of this post.
New Pick: [quote symbol=”FRPT” attribute=”companyName”/] (NASDaQ: FRPT)
- Loading stock data...
Data as of February 21, 2020
- Ticker: FRPT
- Market cap: 2.7B
- Avg. volume: 300,635
- Zacks Rank: 3 (Hold)
- YTD change: 24.94%
- Beta: 0.94
- Forward P/E ratio: 160.40
- P/S ratio: 11.56
- PEG ratio: N/A
- Div. yield: 0.00%
- Next earnings date: 2020-02-25
Freshpet, Inc. engaged in the manufacturing, marketing and distribution of pet food and pet treats for dogs and cats. Its products are sold throughout the United States and in Canada under the Freshpet Select, Vital and Nature’s Fresh brands. The company was founded by Scott Morris and Cathal Walsh in October 2006 and is headquartered in Secaucus, NJ.
About the Company
Freshpet (NASDAQ: FRPT) is an American manufacturer of fresh, refrigerated food and treats for dogs and cats using natural ingredients, and are the first in the fresh and refrigerated industry to be distributed across North America. The company manufactures, markets, and distributes pet food and treats for dogs and cats.
Founded in 2006 by Scott Morris, Freshpet has a reported revenue of $231.8M and 382 employees. The company has raised a total of $156.3M in funding, and it’s main competitors are Dogswell and Perfection Pet Foods.
Freshpet’s products consist of dog food, cat food, and dog and cat treats. It’s recipes include organic, fresh meat and combinations of vegetables, leafy greens and antioxidant rich fruits, without using preservatives, additives or artificial ingredients. The company also claims its food does not contain any processed meat or by-products, and is made in small batches at lower temperatures to preserve the natural quality of the ingredients.
In 2013, Freshpet opened a new manufacturing facility, the Freshpet Kitchens, located in Bethleham, Pennsylvania. The $25M facility was built to resemble human-grade manufacturing standards. In 2015, the company opened a new research and development center within the town. In 2018, Freshpet announced its investment of over $100M to expand its pet food production operations at its current location.
Along with these improvements, Freshpet operates its business, from wind-powered, landfill-free facilities to donate over $3M meals to organizations and shelters across the US. In 2018, the company started its Fresh Start campaign, a charitable effort to raise awareness for shelter animals that are often forgotten.
The executive leadership includes Charles A. Norris as Independent Chairman of the Board; Scott Morris as the President and Chief Operating Officer; William B. Cyr as Chief Executive Officer and Director, and Richard A. Kassar as Chief Financial Officer.
As the company takes big steps to reduce their impact on the planet, their efforts to have zero carbon footprint makes them stand out in the market. Not only has Freshpet become an ethical choice for dog and cat owners who prefer organic products, but their market placement as a sustainable company attracts investors with similar beliefs.
Why I Like Them
I came across Freshpet about a month and a half ago. I ignored it at first because it was only a Zacks Rank #3 (Hold). But I added it to my watchlist and noticed that the price kept growing steadily.
You can see this easily with the chart above, but also just seeing the YTD change of almost 25%, even despite last week’s drop. It’s been seriously on the move for quite a while and even with the bleed-off last week, the trend (as I’ll show below) is still strong.
You can see that Friday was quite an active day. It both hit its 52 week high of $81.29, but also dropped significantly down to its close at $74.24 (a nearly 9% drop in one day).
That might seem to bode ill for this stock, but $81.29 is massively above it’s 20-day moving average of $68.44. I wanted to recommend this stock but was getting pretty uncomfortable with some of the highs it was reaching, so this pullback is great news for me.
I’m going to introduce a new chart type to illustrate this. Above you see the Double Bollinger Bands® (DBB), a modification of the traditional Bollinger Bands®.
The DBB indicator shows 1 and 2 standard deviations from the 20-day moving average. The idea is that the price should generally bounce between these standard deviations.
In this version, X (the red center line) is the 20-day SMA. B1 and B2 are the upper and lower bands set at 1 standard deviation. A1 and A2 are the outer bands, set at 2 standard deviations.
This creates three major zones:
- The zone between A1 and B1 is the “buy” zone.
- The zone between B1 and B2 is the “neutral” zone.
- The zone between B2 and A2 is the “sell” zone.
Of course it could also be above A1, or below A2. Below A2 is generally an oversold condition, and above A1 is generally an overbought condition.
With this in mind, you can see there have been many buy signals. However for about a week it was solidly in the overbought range (above A1). Only with last week’s pullback did it come back down into the buy zone.
I love using this indicator because I find it very accurate. You can see how the price was running away for a while and was due for a bit of a reset. Friday gave it this reset and now it sits comfortably in the buy zone.
I’ll give the ADX chart simply because I always do, and as you well know by now, it’s one of my favorite indicators.
You can see that the trend here is insanely strong and has been for months. The pullback really hasn’t affected the trend at all, simply because even the current, lower price is still extremely positive, again pointing back to the nearly 25% change in the price year-to-date. It’s been on a crazy run and showing no sign of slowing down.
Now as with above, FRPT’s earnings call is before the market opens tomorrow (2/25). It’s expected to beat analyst estimates, so I’d expect the run to continue if so. If not, then we’ll just have to see.
But despite earnings being tomorrow, I’m still comfortable putting this recommendation out there. In my opinion, it’s a great stock in both the short and long term, so even if there would be a slight dip after earnings, I’d still buy it up and look for a further gain in the future.
Perficient, Inc. (NASDAQ: PRFT) has gotten pretty-well beaten up by the market in the last few days. However the fundamentals are still strong, and depending on how earnings go tomorrow, I’d expect more upside to come once the market recovers.
Freshpet Inc. (NASDAQ: FRPT), on the other hand, has gained nearly 25% year-to-date, even with the pullback the last few days. I’d see no reason for this not to continue, but again we’ll have to see how earnings go tomorrow.
My Wealth-Building Portfolios
I’ve been giving these stock picks for the last 2 months or so.
In that time, if you had invested in all my picks, you would have gained 39.98%, compared to the market’s 2.92% (yeah it’s been a rough couple of months for the market).
Trading isn’t just a bit of side-income for me. It’s literally my primary livelihood. So you can see that I take this quite seriously.
These aren’t my only picks, though — not by a long shot. In fact, I have a total of 5 portfolios with a variety of investing styles and average returns, all of which beat the market by a minimum of 82%.
I’m launching this portfolio service today for those who want my specific buy and sell alerts for all the stocks in my portfolios.
Just click below to check it out: