Buy Alert: Advanced Energy Industries (AEIS)

By Jim Pearce • March 2, 2017

TRADE INSTRUCTIONS
Date: March 2, 2017
Name: Advanced Energy Industries
Symbol: AEIS
Type: Open
Limit: Buy below $63

TRADE TARGETS
Holding Period: 3 months
Target Return: 10.4%
Annualized Return: 41.6%
Target Price: $69.55
Stop Loss Level: $56

COMPANY DESCRIPTION
Advanced Energy Industries, Inc. provides precision power conversion, measurement and control solutions. The Company is engaged in designing, manufacturing, selling and supporting its power conversion products and solutions, used in various applications ranging from manufacturing and industrial processes to instrumentation, and test and measurement. Link to company website.

TRADE RATIONALE
AEIS is a key supplier to several tech companies that should do particularly well in the “Trump stock” mentality that is currently driving the market higher. The company has partnered with several chip manufacturers that specialize in 3-D NAND memory chips that are used in smartphone, laptops, tablets and televisions to support high resolution for video display panels.

In terms of financial metrics, its PEG ratio of 0.6 suggests the company is undervalued for a growth stock; its 36.1% average annual growth rate in earnings over the past five years far exceeds its trailing earnings multiple of 21.6. The company carries no long-term debt, and operating margins are in excess of 25% while earnings grew by 22% during the most recent quarter.

This is not an event-driven recommendation. The company does not report earnings until the first week of May, and we do not expect any major announcements between now and then (although the company is acquisitive, and could announce M&A activity at any time). But the stock has tremendous institutional sponsorship, with 98% of its float owned by pension plans and mutual funds leaving very little stock available to retail investors.

For the technicians among us, AEIS has one of the cleanest charts I have ever seen. During the past year its share price has displayed remarkably little volatility relative to its moving average, and has rarely traded outside of its Bollinger Bands. Its RSI is 58.9, and has been above 50.0 since mid-December.

NOTE: AEIS is optionable, but trades on very low volume so use limits when placing orders.

Stock Talk

Comments Oldest First

Comments Guidelines

Roger Dehring

03/02/17 ‐ 3:50pm ET March 2, 2017 at 3:50pm ET

Got a bit creative, Jim,

Sold JUL 60/55 puts and bought JUL 65/70 calls. Had to go out to JUL as JUN options weren’t available. Paid a whopping $0.30 ($30.00 per contract).

Will monitor and manage like I did with DHI.

Thanks, Roger

black arrow

03/05/17 ‐ 10:35am ET March 5, 2017 at 10:35am ET

Hi Roger this seems something like a Straddle, but maybe it would be a a sort of double straddle.
interesting as always.

Roger Dehring

03/16/17 ‐ 11:41am ET March 16, 2017 at 11:41am ET

With AEIS moving up nicely, Jim,

Decided to close my position this morning. Paid $0.30 debit to get in, got $1.95 credit this morning.

Had July options. July is a long time off. Will gladly take a very nice profit today.

Thanks for another great trade, Jim,

Roger

black arrow

03/16/17 ‐ 1:23pm ET March 16, 2017 at 1:23pm ET

Roger,
Way to go you were ahead of the curve.
Any creative ideas for the SLV trade started months ago?

Roger Dehring

03/16/17 ‐ 1:55pm ET March 16, 2017 at 1:55pm ET

Not in that one, Black Arrow

Jim Pearce

03/16/17 ‐ 2:23pm ET March 16, 2017 at 2:23pm ET

Jim Fink just issued an alert on that trade, so check that for instructions: https://www.investingdaily.com/velocity-trader/alerts/30506/slv-a-sterling-and-pearly-roll/

black arrow

03/16/17 ‐ 4:04pm ET March 16, 2017 at 4:04pm ET

Jim, Thanks for the reply I will definitely check it out.

Larry Johnson

03/03/17 ‐ 10:37am ET March 3, 2017 at 10:37am ET

Limit order filled this morning at $62.00.

Jim Pearce

03/10/17 ‐ 3:24pm ET March 10, 2017 at 3:24pm ET

We’ve gotten a nice rise out of AEIS the past couple of days. I’m not sure why that is, but it coincides with an announcement the company made earlier this week that it will host an “Analyst and Investor Event” on March 21 in NYC: http://finance.yahoo.com/news/advanced-energy-highlights-precision-power-220000785.html. A company doesn’t usually host such an event unless it has mostly positive things to say about its prospects, and analysts sometimes revise their earnings estimates – and target stock prices – upward after attending this type of event. As I write this the April 21 call option at $65 is asked at $2.25 while the stock is trading at $64.55, so might be an interesting play for the short term traders out there.

Jim Pearce

03/13/17 ‐ 10:49am ET March 13, 2017 at 10:49am ET

The buying in AEIS continues this morning; looks like somebody is accumulating a position in it. Would be nice to know who it is, so I will continue digging. The April $65 call option I recommended on Friday is now asked at $2.60 since it is in the money after the stock’s $1+ jump in price today.

Jim Pearce

03/15/17 ‐ 2:39pm ET March 15, 2017 at 2:39pm ET

I still haven’t seen any news from AEIS to explain its powerful move up the charts this week, but it’s up another 2.6% today and up nearly 10% only two weeks after opening this position! My target price of $69.55 is less than $1.50 away so I will raise the stop price on it if it gets above my target price later this month.

CJ

03/20/17 ‐ 10:23am ET March 20, 2017 at 10:23am ET

Above the target return and price!

Jim Pearce

03/20/17 ‐ 10:45am ET March 20, 2017 at 10:45am ET

Yep! And still no news to explain its recent run up the charts so at this point I would guess that either, (1) an institutional investor has decided to take a position in it (more likely), or (2) the buyout rumor may be coming true (less likely). Regardless of the actual reason why, if/when it closes above my target price I will raise the stop price to lock in most of our gain while giving it an opportunity to climb further.

Larry Johnson

03/20/17 ‐ 11:30am ET March 20, 2017 at 11:30am ET

Bailed out at $70 this morning. Wasn’t taking any chances with this one. I took my 12%+ profit and ran like a scalded dog with it….LOL

Benny K

03/21/17 ‐ 11:45am ET March 21, 2017 at 11:45am ET

Jim, are you making a recommendation for a new stop price on AEIS?

Jim Pearce

03/21/17 ‐ 2:20pm ET March 21, 2017 at 2:20pm ET

Not yet; it is down today so it is below where I would set the revised stop price at the moment. As a general rule, if a stock gets 2% above its target price then I raise the stop price to 2% below the target price to give it some room to vacillate, but still protect most of the gain. So in this case, if AEIS closes at $70.95 or higher then I would raise the stop to $68.16.

Dramatic License

03/21/17 ‐ 2:23pm ET March 21, 2017 at 2:23pm ET

Any idea what is up with the market. Seems like most everything is down, AEIS included.

Jim Pearce

03/21/17 ‐ 3:59pm ET March 21, 2017 at 3:59pm ET

Looks like a general concern that Trump’s pro-growth agenda may not be as easy to implement as assumed (http://finance.yahoo.com/news/stocks-are-tumbling-banks-getting-crushed-160305393.html). We should know by the end of this week how the healthcare bill fares, which in turn could push the market one way or the other.

Add New Comments

You must be logged in to post to Stock Talk OR create an account