By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Weekly
From Cabot Wealth Advisory 11/11/10 Sign up for free Cabot Wealth Advisory e-newsletter
For my stock pick today, I’m going with an old favorite that looked like it was toast a few weeks ago … but now shares have begun to round out nicely and could (emphasis on could) be near the start of a new upleg.
I’m talking about Salesforce.com (CRM), which is a blue-chip play in the cloud computing space. Actually, the company is more “the next Oracle” in that it continues to deliver innovative software products to its thousands of corporate customers.
And, of course, all of its products are delivered on-demand, so there’s no need to install or continually upgrade at every users’ terminal; Salesforce does that centrally, and the programs are accessed over the Internet. That’s the nature of cloud computing.
The stock has had a very long run-up during the past year, and it initially got off to a good start when the market got going in early September. However, as it turned out, the stock’s inability to correct and consolidate much during the market’s spring correction (from April through August) meant that there were still lots of weak hands owning shares. And when that happens, a trend change can be on the horizon.
Sure enough, CRM plunged through its 50-day moving average on huge volume in early October; for any prudent investor, that was a signal to at least lighten up, if not bail completely. But the prudent investor also keeps such a stock on his or her radar screen—sometimes these leaders can re-base after such a decline, and that’s exactly what Salesforce.com appears to have done.
All told, the stock fell from 124 to 98, but is now sitting around 115 on light volume, in the seventh week of a basing structure. The company is set to report earnings next Thursday evening, and my guess is that if (but only if) CRM can power above 120 following its earnings report, the stock could have a good run in it. An adverse reaction, however, would likely put in a more meaningful, longer-term top.
So what’s my prediction of what CRM will do? Nice try! I don’t predict because I don’t need to. I think it’s best to keep an eye on the stock and to take a stab at it if you see a powerfully bullish reaction to its report next Thursday evening.
Editor’s Note: Michael Cintolo is VP of Investments for Cabot, as well as editor of Cabot Market Letter, a Model Portfolio-based newsletter of the best leading growth stocks in the market. Thanks to top-notch stock picking and market timing, Mike’s simple to follow and concentrated (no more than 12 stocks) portfolio has crushed the market by 15.4% annually since the start of 2007! If you want to own the top leaders in every market cycle, be sure to give Cabot Market Letter a try by clicking HERE.
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.