GEO Investing

As Wall Street is now in the throes of another “market correction”, we’d like to highlight four stocks that have received muted price reactions to bullish company announcements. We strongly believe that when the market stabilizes and recovers, these stocks could experience quicker and more meaningful snap backs than stocks in the broader market.

Market Corrections Yield Opportunities

Here are four names we are watching for potential bounces when the market stabilizes:

Educational Development Corp. (NASDAQ:EDUC) ($9.22) – a trade publisher of a line of educational children’s books in the United States.

After hours, on January 14, 2015 EDUC reported strong Q3 2016 results:

  • Sales of $24.4 million vs $10.9 million in the prior year period
  • EPS of $0.31 vs $0.13
Shares were marked up to about $10.00 on the heels of the earnings report, but the market slid over 300 points on January 15, overshadowing EDUC’s report.  Shares of EDUC hit a recent high of $17.59 before quickly retracing to current levels of around ~$9.25.  For more color on the EDUC story and the recent strong earnings report, we encourage you to read a Seeking Alpha article just published titled, “Educational Development Corporation: A Low P/E Non-Cyclical Stock With Hyper Growth“.

Taylor Devices Inc. (NASDAQ:TAYD) ($15.34) – designs, develops, manufactures, and markets shock absorption, rate control, and energy storage devices for use in machinery, equipment, and structures.

 On January 12, 2015 TAYD reported strong Q2 2016 results:

  • Sales of $8.8 million vs $6.7 million in the prior year
  • EPS of $0.27 vs $0.15 in the prior year

Management offered bullish commentary:

“We are receiving new seismic orders for dampers that are quite frankly larger than ones we have previously manufactured & shipped,” stated Douglas P. Taylor, President. He continued, “To that end, we have started a new 10,000 square foot addition to 90 Taylor Drive for the testing & assembly of seismic products; we hope to have the related construction completed by next year.” He concluded, “Our sales are continuing at a record pace and all indications suggest that we will have another strong year.”

Shares of TAYD enjoyed a brief bump on earnings, trading above $16 per share before pulling back to low $15.00 area, essentially where shares sat before the earnings announcement.

Super Micro Computer Inc. (NMS:SMCI) ($24.43) – develops and provides high performance server solutions based on modular and open-standard architecture.

On January 12, 2016 SMCI reported preliminary Q2 2016 results:

  • The Company anticipates that it will report net sales for its second quarter of fiscal 2016 in the range of $637 million to $639 million. This compares to the Company’s previous guidance range of $580 million to $630 million.   Guidance is above analyst estimates of $621.4 million.
  • The Company also anticipates that its non-GAAP earnings diluted per share will be in a range of $0.69 to $0.72. This compares to the company’s previous guidance of $0.54 to $0.64.   Guidance is above analyst estimates of $0.66.
Shares of SMCI closed at $21.52 on January 11, 2016 and traded as high as $28.45 on the day of the earnings announcement.  Shares closed at $24.43 on Friday.  SMCI’s 52 week high is $42.00.

MeetMe Inc. (NASDAQ:MEET) ($3.31) – owns and operates a social network for meeting new people on the Web and on mobile platforms in the United States.

On January 6, 2016 MEET raised its fiscal 2015 guidance:

  • Total revenue is expected to be approximately $56.5 million, an increase of 26% from full year 2014, and above the Company’s previously released guidance range of $53.5 million to $54 million for full year 2015.
  • Adjusted EBITDA is expected to be approximately $19.5 million, an increase of 289% from the prior year, and above the previously released guidance range of $16.5 million to $17.5 million for full year 2015.
Shares of MEET reached a new 52 week high of $4.54 on January 8, 2016 after recently trading at around $3.00. Our confidence meter for MEET is lower than the other 3 stocks mentioned above, as an 8k filed on January 14, 2016 disclosed that the company has been informed by one of its largest shareholders of its intention to distribute its approximately four million shares of common stock of the Company to its partners for trading. Shares dipped to a low of $2.81 on the day of the filing. It is unclear if the large shareholder has already distributed the shares. Trading volume was extremely high the day before and day of the filing, so it is possible a good majority has already been sold. If the shareholder has already exited, shares of MEET may be quick to rebound as the markets recover.

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