TRADE INSTRUCTIONS
Date: April 20, 2017
Name: Argan, Inc.
Symbol: AGX (NYSE)
Type: Open
Limit: Buy below $67

TRADE TARGETS
Holding Period: 2 months
Target Return: 11.9%
Annualized Return: 71.4%
Target Price: $75
Stop Loss Level: $60.25

COMPANY DESCRIPTION
Argan provides engineering, procurement, construction, commissioning, operations management, maintenance, development, technical and consulting services to the power generation and renewable energy markets. It also provides telecommunications infrastructure services including project management, construction, installation and maintenance services to commercial, local government and federal government customers. Link to company website.

TRADE RATIONALE
Our Rapid Profits Matrix does not discriminate when it comes to market capitalization. Last week it identified $400 billion Facebook as a short term trading opportunity (which thus far has worked out quite well), and this week it is going to the other end of the spectrum with $1 billion Argan.

Since Argan scores highly according to one of our best performing, but also shortest-term models, I am putting a two-month target holding period on this position. I am also tightening up the stop price a bit since historically these type trades either pay off quickly or don’t do much so no point in taking on more risk than is necessary.

In this case, Argan’s high earnings yield combined with its even higher return on capital suggest its share price is undervalued by roughly 15%, so I am putting a $75 price target on this trade.

The stock is down about 5% so far this year, in part due to the Trump’s administration’s ambiguous stance towards renewable energy, which generates the bulk of Argan’s revenue. Over the past six years revenue has grown at compounded annual rate of 37% under the more eco-friendly Obama administration.

But with gas prices on this rise and Trump unable to get much congressional support for his legislative agenda, Argan could pop back up as investors realize the energy sector won’t be abandoning renewable energy projects that make economic sense.

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