Scanning for profits

Optical scanners are at the center of inventory control, and ScanSources is at the center of its market.

By Jim Van Meerten Jan 12, 2010 11:40AM
When looking for stocks to add to my portfolio, I begin by screening on Barchart for the stocks hitting the most new highs in recent trading sessions.
 
I don't look for the highest percentage appreciation. I look for the stocks hitting new highs day after day on a consistent basis. Tuesday, ScanSources (SCSC) was near the top of the list.

As this economy begins to turn around, control of the movement of merchandise from manufacturer to wholesalers and distributors, and finally from retailers to the consumer, will be essential. SCSC distributes of the type of optical scanning devices that will be at the heart of inventory control as inventory goes through the various levels. The company is a key player in optical scanning devices in the U.S., Latin America and Europe.

It has had a price appreciation on 15 of the past 20 trading sessions and in four of the most recent five sessions. The price appreciation in the past 65 days has been 30.04%. The stock's price has recently turned upward, and the stock has five buy signals on Barchart's five short-term technical indicators of a 100% short term buy signal.

The stock is not widely followed by Wall Street, but analysts predict that sales will increase by 6.6% and EPS by 17.1% in the coming year. There are no major sell recommendations out there, and the smart money -- the short sellers -- has reduced short sales from 2.8 million shares to below 980,000 share in the past year. Fewer people are betting against this company.

Surveying other sites, Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment rating. Over on Motely Fool, CAPS members think the stock will outperform the market by a vote of 73 to 4, with the All Stars in agreement 31 to 1. Of the Wall Street columnists Fool follows, they are favorable 3 to 0.

The stock has what I look for:
  • Hitting new highs in better than 50% of recent trading sessions.
  • Analysts predict increased sales and earning.
  • Short sellers are reducing their bets against the company.
  • Other technical sites have the same opinion I can up with.

Recommendation: No business can compete effectively without proper inventory control. Optical scanning devices have a pivotal place in inventory control. The company is positioned in the prime markets of the US, Latin America and Europe. I'm adding SCSC to my Wall Street Survivor portfolio around 29.64 with a protective stop loss no lower than 25.50.

 

Disclosure: I held no positions in SCSC at the time of publication.

 

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeerten@gmail.com

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