In the February 29th issue of the Seasonal Forecaster newsletter I focused on a ‘basic industry' stock – the type I like to look for when the well-known, often-in-the-news stocks aren't making any progress. The company is Albemarle Corp (ALB). One of Albemarle's top product sectors is Lithium derivatives, increasingly used in electric cars and electronics. Your cell phone has a lithium battery in it. Albemarle may have been the source of it.
I covered how the revenue of the company has jumped from $598 million two years ago to $930 million last quarter.
The stock was trading within a tight range. As usual, I covered the ways to increase the probabilities of success in any ALB trade by saying “The best trade entries would be to either trade an upward breakout of the range, or wait until the stock returns to near the bottom of the range and starts to rebound.”
I mentioned a key detail: “One thing that really stood out to me is the amount of stock being bought by insiders. In the past two years, seven key insiders bought new shares. This is pretty unusual for a company where you usually see just selling due to compensation.”
And of course the clincher was the seasonal pattern of the stock:
“ALB's seasonal pattern shows a pretty good track record of gains over the next three months. The 13-week period has averaged an 11.1% return, with gains in 76% of the years. The five losses (or non-gain, as in the case of a net 0.0%), all were relatively small. But the stock has produced some strong gains over that time period, even shortly after the 2008 crash.”
I was going to add the stock to the newsletter portfolio, but to again increase the odds of success, I specified a condition on the trade entry. I didn't have to wait long for ALB to meet my criteria. The next day the stock jumped out of the trading range and my trade entry was triggered.
The combination of good fundamentals, waiting for a higher probability technical setup, a strong seasonal pattern, and evidence of increasing institutional participation this year has once again led to a good trade. In this morning's newsletter I am raising the trailing stop so the worst I can now do in this trade is break-even.
For now, this stock is a keeper. On April 1st, this position will pay a dividend of $0.305 a share. Did I mention Albemarle has increased dividends for 19 consecutive years, and the dividend has been growing at a 15% rate? I made sure to mention in the newsletter that this stock was a good candidate for dividend reinvestment.
To find out more, please click on the following link: www.markettamer.com/seasonal
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