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Cerner Corporation: Big Stock Market Winner
by Alexander Green, Advisory Panelist
Saturday, July 11, 2009: Issue #1038
Studies show that the average investor does far worse than the Dow Jones Industrial Average or the S&P 500.
It’s not just that they’re not getting good advice. Most of them aren’t even asking the right questions.
As a former money manager, I found my clients spent the majority of their time asking about – and fretting over – what lay just ahead for the economy and the stock market.
Nobody knows the answers to those questions.
So it’s far better to ask, “What companies are likely to thrive – and report enormous profit gains – in the current economic environment?” The answer to that question is where the big money lies.
Let me give you an example.
Cerner Corporation Recommendation
In early February, I recommended Cerner Corp. (Nasdaq: CERN) to subscribers of The Momentum Alert.
As you may recall, the vast majority of stocks were in a freefall at the time, one that wouldn’t end until the market bottomed on March 9.
But that didn’t matter. You see, Cerner is a company with a mission: to take the pen out of doctors’ hands.
Cerner makes systems that automate records in hospital and doctor offices. This is much more efficient than handwritten notes.
It’s also much safer.
Automation reduces errors. Doctors – famous for nearly illegible handwriting – can cause the wrong drug (or the wrong dosage) to be inadvertently dispensed at a hospital or pharmacy. And they can forget to renew old prescriptions.
That’s why Cerner’s scalable Millennium software is already installed in 6,000 hospitals, pharmacies and doctors’ offices. A new federal push for records automation will only increase that footprint.
Despite the severe recession, I pointed out that recent earnings at Cerner were up 24% on a 13% increase in revenue. Plus, the company had a $3.4 billion order backlog.
It didn’t matter that most companies were struggling. Cerner wasn’t.
Cerner Corporation: Health Information Technology
The health information technology leader operates in a recession-resistant industry. And spending on electronic recordkeeping will only grow in the near future.
Since February, Cerner has performed like a champ. The company’s bottom line is still fattening at double-digit rates. And the stock hit a new 52-week high last week.
Look at the chart below. While the Dow is only slightly higher than it was in early February, our shares of Cerner are up over 75% – and I see plenty more upside ahead.
What’s more, we’ve already locked in profits of 146.15%, 197.95% and 669.23% in our Cerner June $40 calls.
Ironically, if we had known that the economic news was about to get worse – and the market was still weeks away from hitting bottom – it might have prevented us from making a fabulous investment.
It’s often a good thing that you don’t know what lies just ahead for the Dow.
In sum, forget about the market and instead focus on companies that are primed for a sharp jump in profits in the months ahead. That’s where you’ll see the biggest gains.
True, the vast majority of publicly traded companies will not report good earnings in the weeks ahead. (Quite the opposite, in fact.)
But so what? You don’t need the vast majority of companies. Restrict your purchases instead to those exceptionally well-managed firms with the best near-term business prospects.
They may not be plentiful but they sure are profitable.
Good investing
Alexander Green
Editor’s Note: If you’d like to get all of Alexander Green’s latest momentum picks – before they go on a tear, take a look at his premium service, The Momentum Alert.
- Momentum Investing: The Secret to a Red-Hot Stock Portfolio
- Momentum Trading: Five Guidelines for Supercharging Your Portfolio with Momentum Stocks
- Tracking Insider Trading: How to Pick a Winner in a Down Market
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One Response to “Cerner Corporation: Big Stock Market Winner”
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Alexander Green is the Investment Director of The Oxford Club. A Wall Street veteran, he has over 20 years experience as a research analyst, investment advisor, financial writer and portfolio manager.
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July 11th, 2009 at 5:11 pm
Article is fine as far as it went. Why not reveal the name of the stock mentioned in the beginning?
After all, I was sent this letter because I am a subscriber, President’s Circle I think. Quit playing games with your clients. We are busy and need to get the most use from our reading as possible in the least amount of time.
Also, I find that if I go to your web site I find special reports.
Why not notify us each time you publish a special report? And while you are at it, how about putting the date of publication on it rather than the year. If today I find a report dated 2008, it could be a year and a half old.
Lastly, stop sending so many promotional letters and especially cross ad from one service advertising the product of another service. And why is it that I only find out about a speciao report when I read about it in a teaser ad for a service I am already paying for/
Last, I think all of you publishers are more concerned about getting new subscriptions rather than making the reading experience MORE PROFITABLE for the subscribers you already have.
Sincerely,
Aubrey M. Farb , CPA
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