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Universal Travel (AMEX: UTA): Just Inches From a Clean Trade

When I was thinking about the August 29 trade idea on UTA, I couldn't help but be reminded of one of the great Jack Nicholson lines of all time - it was the movie Terms of Endearment. When Shirley Mclaine tells him she loves him, and then asks him what he thought of her statement. He replies- in a way only Nicholson can pull off- "Just Inches From a Clean Get Away".

That's the way I felt about 8/29 idea in UTA. Just inches from a perfect trade. Read the August 29 edition if you want a quick review. I published my first buy recommendation on China based Universal Travel (AMEX: UTA) back in June at $8. Today- 65% net profit today.

I tried to make the perfect call on the early September correction. First recommendation in early June at $8. The second, which was more of a technical buy recommendation, at $10 two weeks ago.

At the time, I suggested buying between $9.75 and $10, and expecting a bounce of 3 or 4 points. I pointed out the stock had made a perfect 61.8% retracement of its big move, and there was a high probability it would turn back up. I remember one loyal reader suggesting $2 was in the cards as the stock would keep collapsing. If you're reading- sorry- dead wrong- so far.

I was two days and $.50 from a perfect trade. Sorry. I suggested a tight stop of $9.50 for traders, so if you adhered to that discipline, you missed the move back up. As I said- just inches from a perfect trade.

Now, we're back to $13.25, and headed back up. A new high over $16.50 would bring my longer term $20 price target into play. Any weakness is a buying opportunity here.

You never know, but I'll bet this stock finds $20 before it finds $2. With $1.25 to $1.50 in EPS this year on a 50% annual growth rate, I like our chances.
 

The Skinny on CalAmp (NASDAQ: CAMP)- More 411

Here's why it's worth reading the OTC Journal. Here's the skinny on CalAmp, and why no one quite gets when it's so undervalued today. I've got pictures.

About 80% of their business is related to your standard satellite receivers- you know- DirecTV- Dish Network- AT&T- they all put these satellite receivers on your house.

CAMP supplies these things along with other components. Now- here's the culprit. It looks something like this- or close to it.

This is a little box that is built into the receiver somewhere. It sits somewhere between the satellite dish and your set top box. It boosts and manipulates the satellite signal.

In 2007, CAMP shipped out piles of defective versions of these thanks to a PCB (printed circuit board) supplier. They failed in bad weather. You might have had one on your home system.

CAMP took an $80 million write down in one year, and they have a gigantic pile of them warehoused now. They aren't throwing them away. They are being fixed and shipped.

However, here's the key- when they fix one and ship it, they don't recognize a revenue stream. It's just a balance sheet change- warranty liability goes down, and cash goes up.

Therefore, when they finally run out of these defective parts, the top revenue line will all of a sudden start surging as they sell the new ones they manufacture. They should run out of the defective warranty versions in April or May of next year, and there will be a surge of growth.

In the meantime, they are using this excess cash flow to pay down debt.

I believe they can earn $.27 to $.30 next fiscal year, which starts December 1. The chart you're looking at is long term, and it gives you an idea of the upside. This is a weekly chart going back to 2007.

You can see where the stock collapsed after the defective parts were disclosed. Now, we're in a recovery phase. The stock, over the longer term, is entitled to trade back to a 61.8% retracement of the whole move down. 

This would put is at $5.70. Not totally coincidentally, at 20 x the 2011 estimate of $.27 EPS, the stock trades at $5.40. If there's significant top line growth, look out for much higher levels.

Others are starting to catch on as you can see. It could trade sideways for a while or correct after the recent surge, but CAMP is now headed in the right direction.

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