Nasdaq 100 Watch List: December 16, 2011

Below are the Nasdaq 100 companies that are within 10% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.
Symbol
Name Trade P/E EPS Yield P/B % from Low
BMC BMC Software, Inc. 33.17 13.59 2.44 N/A 3.76 0.79%
VMED Virgin Media Inc. 20.95 67.58 0.31 0.70% 5.02 1.01%
CTRP Ctrip.com International, Ltd. 23.1 19.88 1.16 N/A 3.08 1.32%
SYMC Symantec Corporation 15.46 17.59 0.88 N/A 2.49 1.51%
BRCM Broadcom Corporation 28.72 17.29 1.66 1.30% 2.46 2.39%
LRCX Lam Research Corporation 35.92 7.45 4.82 N/A 1.85 2.86%
SRCL Stericycle, Inc. 76.51 30.36 2.52 N/A 5.49 4.74%
WYNN Wynn Resorts, Limited 105.65 24.66 4.28 2.00% 5.04 5.11%
EXPD Expeditors Int’l of Was 40.37 22.3 1.81 1.20% 4.37 5.54%
FSLR First Solar, Inc. 31.91 5.24 6.09 N/A 0.67 6.23%
AMAT Applied Materials, Inc. 10.33 7.12 1.45 3.10% 1.51 6.49%
HSIC Henry Schein, Inc. 62.44 16.39 3.81 N/A 2.23 6.74%
CHRW Robinson Worldwide 66.59 25.91 2.57 2.00% 8.6 6.89%
DTV DIRECTV 42.1 13.12 3.21 N/A N/A 7.62%
GILD Gilead Sciences, Inc. 37.16 10.86 3.42 N/A 4.76 7.87%
CA CA Inc. 20.12 11.81 1.7 1.00% 1.73 8.11%
NTAP NetApp, Inc. 35.71 21.76 1.64 N/A 3.42 8.21%
WCRX Warner Chilcott plc 14.02 36.89 0.38 N/A 88.81 8.68%
AVGO Avago Technologies 28.8 12.87 2.24 1.50% 3.76 9.01%
RIMM Research In Motion 13.44 2.45 5.48 N/A 0.79 9.19%
INFY Infosys Limited 50.37 18.12 2.78 1.10% 4.73 9.22%
MSFT Microsoft Corporation 26 9.45 2.75 3.10% 3.62 9.94%
Watch List Summary
BMC Software (BMC) has not only fallen to a new 52-week low, it has also fallen to a 2-year low.Based on the decline so far, according to Dow Theory, BMC could retrace to the $40 level.Fair value for the stock is at $44.86.The $40 level seems reasonable within the next year for BMC even though it is 20% above the current price.The most obvious downside target for BMC is the October 2008 low of $22.A decline of $22 would equal a loss of 33%.
It should be noted that despite the market turmoil of 2008, BMC did not fall to the 2006 low.Additionally, the long term support line as drawn in the chart for BMC indicates that $22 ultimate price to watch for. If BMC were to replicate the percentage decline from the May 2008 top to the October 2008 low, the stock would decline to a price of $31.11.
The Punchline: Those interested in BMC could split their investments into two transactions.The first purchase could be done between Friday’s closing price and $31.11 and the second if the stock declines to the $22 level. No additional shares should be bought if the price increases.
Virgin Media (VMED) has an almost uninterrupted price movement from the low in 2008 to the most recent high of $33.32 in May 2011.According to Dow Theory, VMED broke just below the initial support level of $23.30.The next downside target is the 50% principle level of $18.29.Once breaking below $18.29, VMED could be expected to drop to the $13.28 level.The next upside target for VMED is $25.07 which assumes the best case scenario.
 
However, when contrasting the price movement of VMED to BMC during the decline of 2008, the price of VMED gave up all of the gains from 2004 to 2006 and then some.Those interested in VMED should be willing to accept the stock price to decline to the $13.28 in a worst case situation.
The Punchline:There is significant price support at the $14 level for VMED.This transaction should be broken into thirds with an equal number of shares being bought at each level on the downside.No additional shares should be bought if the price increases.
Ctrip.com International (CTRP) is on a pace to replicate the performance from the high in April 2008 to the low of January 2009 which equaled a loss of 72%. A similar decline in CTRP from the high of $50.57 would bring the price down to $14.16.Suffice to say, the stock “only” needs to decline another $8.94 or 38% from the current price of 23.10.This seems very easy considering the high volatility of Chinese stocks.We believe that unless CTRP is summarily dismissed from the Nasdaq 100 index, there may yet be life in this company.
 
We believe that the Nasdaq 100 committee added CTRP to the index based on the performance of Priceline.com (PCLN).Amazingly, at the current price of $23.10, CTRP sits one penny below the 2nd Dow Theory support level of $23.11.any further deviation below the current price almost ensures that the stock is destined for the $10 range.
The Punchline: Watch and wait for CTRP to establish a solid support level.The nearest upside target is $32.26.

 

Watch List Performance Review
In our ongoing review of the Nasdaq 100 Watch List, we have taken the stocks from our list of December 10, 2010 (found here) and have checked their performance one year later. The companies on that list are provided below with the closing prices from December 10, 2010 to December 9, 2011.
Symbol Name 2010 2011
% change
CSCO Cisco Systems, Inc. 19.70 18.88
-4.16%
ISRG Intuitive Surgical, Inc. 260.07 440.4
69.34%
AMGN Amgen Inc. 53.89 58.59
8.72%
DISH DISH Network Corp 18.80 25.83
37.39%
APOL Apollo Group, Inc. 37.95 50.36
32.70%
Average
28.80%
^NDX Nasdaq 100 Index 2,207.45 2,318.68
5.04%
The performance of the top five stocks from last year was amazing. The average performance was five times better than the Nasdaq 100 index in the same period of time.
Disclaimer:
On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies’ most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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