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Old 10-12-2011, 11:24 PM   Nav to Top  #1
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Money SodaStream International

Tonight I want to discuss SodaStream International as a name that could really shoot upwards if we get resolution out of the European financial crisis. Now I am not recommending go out and buy the name tomorrow (I do own the stock) as it is a highly volatile name but its fundamentals are much stronger than its stock price shows. SodaStream International is like a coiled spring just waiting to take off when fundamentals come back as the deciding factor in this market. However, until that happens, I say all cards are off the table. In full disclosure, I do not feel Europe will be solved in the next week or two as many countries have to accept the changes to the Union. Because of this, I feel the markets and SodaStream International will trade in a range and be very volatile for at least another week.

Fundamentals of SodaStream International

Many investors and analysts have called SodaStream International a broken stock but not a broken company. I will admit that I got in the name too soon, and have averaged down my cost basis to just above $40 a share so I am not that far away from break even on that holding, and expect by end of year to start to take profits in SodaStream International. Currently, SodaStream International sits at a very cheap valuation. The company has a P/E ratio of 32 which would be expensive if this stock did not have growth on its side. However, SodaStream International is expected to have a 2012 growth rate of over 42% which translates into a PEG ration of .75 which is very low. Now with that being said, I feel the company could have a much higher growth rate over the next couple years as their product moves into mainstream stores like Costco, Target, Bed Bath & Beyond and Wal-Mart adding millions of potential buyers. This same move is what really lead to the big growth of Green Mountain Coffee Roasters whom I most likely compare SodaStream International business model to. The company has $5 of cash per share on its balance sheet which makes this name even cheaper. The last fact that makes SodaStream International stand out is its current short interest. So many investors are betting against SodaStream International that I will gladly take the other side. The name has one of the highest short interests in the NASDAQ and with its very low float of 13.5 million shares, this name is like a coiled spring waiting to jump much higher on positive news. This could come in either a great earnings announcement in a couple weeks, or with Europe being settled.

Other news outside of SodaStream International

Now once again, I am not recommending to go out and blindly buy SodaStream International tomorrow. Personally, I feel we will have another test downward of the 1080-1100 level on the S&P 500. Even while we have traded in this range over the last couple weeks, Gold and Silver have traded in a range but with a slight upswing since September 23rd. If the markets thought that Europe was going to be fixed quickly, then I do not feel the GLD and SLV would be going up over this time. However, even though I do not hold any positions in any of these precious metals, Silver and the SLV is looking interesting at these prices.

More big news tomorrow will be the quarterly earning releases of Google and JP Morgan. JP Morgan is my favorite bank stock that you could own and once Europe settles it will go back to $45 but I am cautious of the earnings release tomorrow as I feel their trading desk and international revenues will be lighter. Google on the other hand is a name that I feel could break $9.25 a share on earnings (ahead of analyst expectations). Reason behind this is that their CEO has reiterated that they are activating 550,000 android operating systems daily on mobile devices. That is a very big number! The company also launched the Google Plus 1 and social network which should start to pay some dividends now. They also should start to see some margin expansion from the vertical integrations on the Motorola acquisition of adding their operating system to the phones they produce. Not to mention they own the major market share of the search market which is still their cash cow. Now even with my bullish tone on the company I trimmed my holdings by 25% in both Google and Apple as they have had a good run. If I am wrong, so be it, I still have a healthy position to make money on, but at the same time I took some risk off the table after a nice run up.

Regardless of how you view this market. We need Europe to be fixed, and once it does, there are many stocks to invest in on a fundamental valuation basis and one of the best companies to invest in based on fundamentals is SodaStream International!


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