Once a month we’ll feature a breakout (or two) from our premium Breakout Alerts service. This service is for members only and highlights half-a-dozen potential breakouts each week! We’ve had decent success this year with the service and returned nearly 20% in Q1.
This article features two new breakout alerts that will go out to our premium members over the weekend.
Let’s dive in!
Breakout #1: Wedge Industries (000534)
Business Description: Wedge Industrial Co., Ltd. invests in, develops, sells, and operates real estate properties in China. It also engages in power generation and steam heat supply activities.
The company was formerly known as Guangdong Wanze Industrial Co., Ltd. and changed its name to Wedge Industrial Co., Ltd. in May 2013. The company was founded in 1992 and is based in Shantou, China. – TIKR.com
Financials:
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- Market Cap: $622M
- Enterprise Value: $675M
- EV/EBIT: 36x
- ROC: 2.90%
- 3YR Avg. FCF: -$30M
What We Like:
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- Reduction in share count
- Pays a dividend
- EBIT covers interest expense 1.50x
What We Don’t Like:
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- Burning cash
- Lots of debt
- No room for error in lower earnings on debt payments (could slip into failing covenants)
Chart Analysis:
Short Trade Parameters:
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- 3% Entry: $8.32
- 1.50% Entry: $8.45
- Stop-Loss: $8.92
- Profit Target: $6.95
- Reward/Risk: 3.20x
Breakout #2: Xilinx, Inc. (XLNX)
Business Description: Xilinx, Inc. designs and develops programmable devices and associated technologies worldwide. The company offers integrated circuits (ICs) in the form of programmable logic devices (PLDs), such as programmable system on chips, and three dimensional ICs; adaptive compute acceleration platform; software design tools to program the PLDs; software development environments and embedded platforms; targeted reference designs; printed circuit boards; and intellectual property (IP) core licenses covering Ethernet, memory controllers, Interlaken, and peripheral component interconnect express interfaces, as well as domain-specific IP in the areas of embedded, digital signal processing and connectivity, and market-specific IP cores. – TIKR.com
Financials:
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- Market Cap: $22.13B
- Enterprise Value: $21.17B
- P/Normalized E: 33.19x
- EV/EBIT: 30x
- FCF Margin: 28.6%
What We Like:
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- FCF positive 10 straight years
- 60%+ Gross Margins
- 25% Operating Income Margins
- Decreasing Share Count
- Net Cash
What We Don’t Like:
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- Cyclical industry
- Loads of competition
- Increase cash conversion
- Increase Days Inventory
Chart Analysis:
Long Trade Parameters:
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- 3% Entry: $95.05
- 1.50% Entry: $93.66
- Stop-Loss: $85.37
- Profit Target: $117.78
- Reward/Risk: 2.91x
That does it for this week’s featured breakouts. If you’re interested in learning more about our premium service, drop us an email or comment down below. We’d love to chat with you!
