In our search for momentum stocks, we only have found a handful of stocks which are REALLY worth the name. We discussed Extra Space Storage earlier this week, which deserves the number 1 position for most beautiful momentum stock. If we would be granting awards, then Lassonde Industries would deserve the second place.
The chart structure is plain and simple. After a couple of ‘pullbacks’ towards our only technical indicator, i.e. the 90 week moving average, the stock has not come close to its 90 WMA since.
Note how the price peaks are nicely forming a resistance trendline, as evidenced by the blue trendline on the chart.
Is it too late to invest in Lassonde Industries? To answer that question, let’s look at our favorite indicator, which is the deviation from the 90 WMA, as well as some valuation ratios/financials.
The deviation from the 90 WMA is high but very acceptable. During the 2014 peak, the deviation was 40% while today it is 25%. The potentially concerning fact is that price is very close to its resistance line. That does not imply that it will sell off, it simply implies that the upside potential is contained.
With an EPS of 7.6, P/E of 21x, a profit margin of 3.8%, and P/S ratio of 0.8x (extremely low), this company has a very attractive valuation. The market cap is approx. $1B. It is well positioned in the most basic of all industries: food.
Conclusion: we really, really like this company for its long term growth potential. The key risk that we see, is that the stock would go down in a total market collapse, but that will not be a problem in 2016.
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