A Switch to Target Prices

I am adjusting the Profit Catalyst Alert data table to replace the buy limit prices with  target prices. I do not expect any other major changes in the table. This isn’t a change in my investment philosophy or how I value stocks. It is simply a change  to help you make better investment decisions.

Buy limits represent the highest price that an analyst recommends purchase of a stock. Issuing a buy limit assumes that all subscribers have the same tolerance for risk.

A price target is my current expectation of where it will be over the next 6 to 12 months.

I believe a price target is more helpful for subscribers as each one of you requires varying levels of upside to be comfortable buying a stock.

If a stock is following script and fundamentals are improving, my targets will be adjusted upward. Subscribers should view the targets as a starting point for how how high the recommended stocks are expected to go.

With first quarter earnings season upon us later this month, I expect many of these targets will be adjusted upward.

Using a target price should make the decision to buy more clear. Subscribers can see exactly how much possible upside exists for each stock and make investment decisions accordingly.

Including these targets also keeps my feet to the fire. As promised, I am constantly monitoring industry trends and stock specific news. Issuing price targets demands that I keep my models and assumptions current to justify that future price.

All targets are based on a price-to-earnings (PE) ratio tied to the company’s historical and expected earnings’ growth rate. Most of my’ estimates are in line with those published on financial websites like Yahoo finance but some are higher based on assumptions in my models. The PE assigned to earnings is tweaked based on each company’s balance sheet health and management’s history of delivery solid earnings.

Knowing my price targets helps subscribers see if the upside from current prices (versus my initiation price) is great enough to justify the purchase of additional shares in the market today.

Target Talk

Although a stock like Brunswick has increased 14% since my recommendation, I believe it could go up another 39%. Brunswick’s estimates have not increased since my recommendation but investors are becoming more comfortable assigning it a PE in line with a growth stock as opposed to the low valuation of a cyclical stock. This behavior is exactly what I expected due to Brunswick’s acquisition of Cybex, which adds a faster growing and less cyclical component to Brunswick’s boat business.

SolarEdge, the stock that has performed worst in the portfolio, is the one with the greatest potential. This is no surprise as high potential is always packaged with high risk. The uncertainties surrounding government subsidies and the recent planned bankruptcy of SunEdison are weighing on the valuation investors ascribe to all solar stocks. SunEdison’s relentless quest to acquire more and more increasingly expensive renewable energy projects (wind, hydro-electric and biomass projects in addition to solar) led to its financial demise. While SunEdison’s failure does not directly hurt SolarEdge’s fundamentals, I have used a PE lower than its growth rate to account for industry turmoil.

Photronics, a stock with an original buy limit of $15, was clearly in need of an update. As detailed in the last issue of PCA, the company lowered estimates for this year based on softness in low end photo-masks. Despite the small increase expected in 2016 earnings, the company should enjoy a bigger jump in the second half of the year from growth in its more sophisticated products. My initial target, which justified the $15 buy limit, has been updated accordingly and now stands at $13.

Assumptions for price targets for the rest the portfolio are basically the same as when I initially recommended them. As we enter first quarter earnings season later this month there will be surely be new developments to incorporate into my earnings models and the accompanying targets.

I will issue an alert when a target is adjusted. I expect that you will find the new table more transparent and easier to follow. Please send me any comments or questions you have about this change and as always, thank you for being a Profit Catalyst Alert subscriber. The “Open Trades” table on our website has been updated with target prices, but here they are at a glance:



Target Price



Charles River Laboratories








Vera Bradley



Westward Bound

April truly is the cruelest month. As I look out the window at my limp pansies buried under an inch of April snow, the prospect a trip to Las Vegas in May has become even more enticing.

On May 12 and 13 we’re holding our annual Wealth Summit meeting in Las Vegas. It’s a great way for us to meet you, our subscribers, one-on-one, and there are still spaces open if you’re interested.

Also this year each analyst will be making a special recommendation to those who attend the Summit, and to those who are members of our Wealth Society.

For me it’s a fun exercise because there are no rules. I’m not bound to recommend stocks that fall under the strict guidelines of Profit Catalyst Alert. There are many enticing stocks I review that are a bit too expensive for the Profit Catalyst valuation protocol or haven’t displayed the above average volume technical indicator used in the Launchpad method but are enjoying giant secular growth in their businesses.  

As this will be my first year attending I cannot regale you with stories of past summits but word around the water cooler is that this is an event not to be missed. I hope to meet many of you there!

Details of the Summit can be found at www.investingsummit.com.  

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