3 Stocks Experiencing High Volume Buying

Declan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The extended break in trading brought about by Hurricane Sandy was seen as a giant buying opportunity for investors.  Some stocks had already experienced strong buying prior to the hurricane, and these should be watched as potential leaders should this mini-rally expand.  The three for this week are Dice Holdings (NYSE: DHX), Pinnacle Entertainment (NYSE: PNK), and Silicon Laboratories (NASDAQ: SLAB). All three saw volume spikes attributed to strong earnings.

SCORECARD

Dice Holdings

Pinnacle Entertainment

Silicon Laboratories

Volume Buying  - multiple of average trading volume

x32

x56

x66

New [x] Monthly High  - where [x] has a value of:

4

14

6

Sector

Staffing & Outsourcing

Resorts & Casinos

Semiconductor - Specialized

P/E

14.9

22.5

31.1

Market Cap

$525m

$788m

$1.7b

Debt

$42.0m

$1.4b

$100.7m

Levered Cash Flow

$36.5m

N/A

$6.7m

Short Interest

10.7%

7.2%

8.3%

 

Dice Holdings operates career websites and other employment services for sector specialists.  Recent stock buying was attributed to a blow out quarter; earnings-per-share of $0.17 was well ahead of expectations at $0.12.  This continued a trend for earnings beats from the previous two quarters, where before it had tended to report in-line with expectations.  The company generated deferred revenue of $66.1 million off 8,650 recruitment customers, at an average of $7,641 per customer. This compared to deferred revenue of $7,200 per customer from the comparable quarter in 2011. Although only 400 new recruitment customers were added over this same period, it was able to gain more revenue from each customer.  Assuming a consistent level of growth, next quarter should see deferred revenue at $7,751 per customer, and 8,750 customers.  

The stock has been actively engaged in a buyback program, putting to work some of the $52 million it holds in cash.  It bought back 2.7 million shares leaving a 40.6 million float, which is mostly held by institutions.  A high Institutional holding means it's relatively illiquid, and could move quickly, assuming one or more institutions don't decide to sell.  The company is also engaged in acquiring online assets. The company focuses on sites frequented by specialists with skills in fields covered by Dice Holdings recruitment clients. Its most recent acquisition was FINS.com, and Slashdot from Geeknet Media. Can Dice Holdings revive the once leading Slashdot brand in the Tech space? Earnings are set for release on February 7, so this could be a slow burner until then.

Pinnacle Entertainment has the weakest set of fundamentals of the three stocks.  A debt load over double its Market Cap, and an earnings record which has regularly seen quarterly losses, might make some uneasy. However, it has performed strongly in recent quarters, handily beating analyst expectations.  A reported loss of $358 million for last quarter was a significant improvement on the $790 million loss in the comparable quarter a year earlier (adjusted income per share showed an EPS of +$0.30).  One of the overhangs on the stock was the sale of its Atlantic City site, and given Hurricane Sandy, one can probably expect this sale to run into a snag.  This probably means it will lose more than the 70% it was expecting to write the property off for.

While erratic in earnings, Pinnacle Entertainment's P/E is attractive relative to its peers.  Caesars Entertainment is losing over $1 billion a year, while Boyd Gaming is scraping by with a P/E of 51.5.  Isle of Capri Casinos is also struggling.  Executives were bullish on its L'Auberge Baton Rouge property, along with its St. Louis property.  Baton Rouge experienced a 70% growth rate for September with 48,000 "mychoice" signups.  Next year will see work on its River Downs project begin.  At an expected cost of $209 million, excluding certain fees and expenses, the project should be complete by 2014.  An interesting snippet from the earnings call was their respect for Penn Gaming...

Silicon Laboratories is the largest of the three companies mentioned.  It also enjoyed the greatest relative volume buying of the three stocks.  Semiconductors was one of the hardest hit sectors since the September high, so any stock in the sector which has managed to hold its ground is worthy of attention. It's most recent earnings continued its trend for beating on estimates. In fact, it's a stock where analysts have found themselves on the wrong side of the projection by quite a large margin.  Company projections for next month are also expected to beat.

Executives attributed the 20% growth in earnings to market share growth and its commitment to R&D.  The growth was not restricted to one group, with consumer and industrial markets doing well despite macroeconomic weakness.  Through its R&D investment it has created Multipoint Control Units (MCU) which aren't tied to specific hardware assets, but instead are suited to a wide variety of application.  This increases the potential for profit, while reining in expense costs. 

Of the various divisions, its Broadcast department is perhaps the most interesting.  The division accounted for a third of Q3 revenue and was up 18% year-on-year, and 8% sequentially.  It was operating better than expected, despite the absence of a seasonal boost (which may yet come).  But the company started its first shipments to China.  Keep an eye on how the China market develops; Japan and Korean business came in ahead of expectations, which augurs well for its China customers. 

The company has also engaged in some nip-and-tuck; acquiring new offices in Austin, closing a $230 million credit facility, and buying back 400,000 shares (of a 39.4 million float), with funds available to buyback an additional 1.1 million shares.  All helping to reduce expense costs and increase earnings per share.

Each of the three stocks have their own unique merits in a very diverse set of asset classes.  All have seen strong buying triggered by earnings, and all three have relatively high Short Interest ratios.  A high Short Interest ratio represents a fresh wave of buying potential, triggered when shorts sense they are on the wrong side of the market, as the current mini-rally is perhaps suggesting.  All three are worthy of watching in the months ahead. 


fallond has no positions in the stocks mentioned above. The Motley Fool owns shares of Silicon Laboratories. Motley Fool newsletter services recommend Silicon Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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