JANUARY ISSUE NO.2 2020 IN THIS ISSUE R O S S T L + H A B E R T E A M 2019 Model Book ARWR Sector: Health Care Industry: Biotech Summary: Arrowhead Pharmaceuticals, Inc. develops medicines for the treatment of intractable diseases in the United States. Some of the company's pipeline includes ARO-AAT, a RNA interference (RNAi) therapeutic candidate that is in Phase II clinical trial for the treatment of liver diseases associated with alpha-1 antitrypsin deficiency & ARO-APOC3, which is in Phase I clinical trial to treat hypertriglyceridemia. ARWR has sported triple digit EPS and sales growth for the prior 4 quarters, a sharp increase in institutional sponsorship over the last 8 quarters, not to mention, a big turnaround in ROE over the prior 4 quarters. ARWR triggered two clear entry areas at the beginning of its run. It then went on to form a constructive base over the next few months and broke out on massive volume, offering a couple more entry areas along the way. ARWR then continued higher in an organized, stair-step pattern as its rate of ascent steepened. ARWR broke out through $15.13 on 2/8/19 and traded as high as $73.72 on 11/29/19, which so far, is a gain of 387% in 40 weeks. 1 2019 Model Book SHOP Sector: Technology Industry: Software - Enterprise Summary: Shopify Inc. provides a cloud-based multi-channel commerce platform for small and medium-sized businesses in the United States, the United Kingdom, Canada, Australia, and internationally. SHOP's qtr. over qtr. EPS and sales have been very strong for the last 8 qtrs. and then some. However, it’s worth noting that SHOP’s September’s qtr. over qtr. EPS dropped off into the red on both the September ’18 and September ’19 qtrs., despite revenues maintaining their solid double-digit growth of about 50%. The only other chink in SHOP’s armor is that it is currently forming a 6th stage base, which is considered late and thus has a much higher probability of failing than a stage-1 or stage-2 base. Otherwise, SHOP is a big leader in its group with a relative strength rating of 98 and huge pick-up in institutional sponsorship, each quarter, for the last 8 quarters in a row. SHOP has been a stellar performer since July 2016. It broke out through $164.13 on 1/31 and hit an all-time high of $409.61 on 8/27 for a gain of 150% in 28 weeks. Despite a few shakeouts below its 21-DMA and 23-EMA during its massive run, it respected its 50-DMA and 65EMA until it topped and rolled over. SHOP is currently attempting to break out from its most recent, late-stage base, which intrinsically carries much higher risk, although it appears to be back under accumulation, since the beginning of December. 2 2019 Model Book BEP Sector: Utilities Industry: Alternative Summary: Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, Brazil, Europe, India, and China. The company generates electricity through hydro, wind, solar, cogeneration, and biomass sources. Its portfolio consists of approximately 17,400 megawatts of installed capacity. BEP's quarter over quarter earnings were growing at a solid triple digit pace until its most recent quarter. Also, the alternative energy stocks have been a leading industry group since the beginning of the year and BEP has been one of its top performers. BEP broke out through $29.11 at the beginning of February 2019 and hit an all-time high of $48.72 on 12/10/19 for a gain of 67%. This stock trades in a very tight and organized manner, has yet to close below its 65-EMA and has respected its 23-EMA throughout the majority of its run. Stocks that trade in this manner are much easier to hold. 3 2019 Model Book CDLX Sector: Technology Industry: Software - Enterprise Summary: Cardlytics, Inc. operates a purchase intelligence platform in the United States and the United Kingdom. It operates in two segments, Cardlytics Direct and Other Platform Solutions. The company's platform is the Cardlytics Direct solution, a proprietary native bank advertising channel that enables marketers to reach consumers through their trusted and frequently visited online and mobile banking channels. CDLX reported 120% growth quarter over quarter for the most recent quarter, backed by a 63% increase in sales. Also, institutional sponsorship has exploded over the prior 8 quarters. CDLX’s float is just 14.7 million shares and its 50-day average volume is 530,000 shares, which makes for a powerful mover. CDLX broke out through $19.98 on 5/10/19 and made a new all-time high of $65.43 on 12/5/19, for a gain of 227% and appears ready to head even higher. CDLX has respected its 65-EMA since in broke out back in May, so a close below this key moving average would be a major sell signal. 4 2019 Model Book BLD Sector: Discretionary Industry: Construction Products Summary: TopBuild Corp. engages in the installation and distribution of insulation and other building products to the United States construction industry. The company operates in two segments, Installation and Distribution. It offers insulation products, rain gutters, glass and windows, fireproofing and firestopping products, garage doors, fireplaces, shower enclosures, closet shelving, accessories, and other products; and residential insulation services. BLD has been growing quarter over quarter earnings at a solid double-digit rate over the prior 4 quarters, although their sales growth has dropped off noticeably over the prior 2 quarters. This is a red flag and something to be aware of if BLD begins to break down. BLD has been trading in a tight and organized manner since it broke out through $51.49 on 1/13/19. It has also shown great respect for its key moving averages along the way. So far, any break of its 23-EMA has been contained by its 50-DMA and any break of its 50-DMA has been contained by its 65-EMA. BLD hit an all-time high of $113.74 on 11/27, which is a gain of 121% in 42 weeks and it could easily continue higher from here. 5 2019 Model Book COUP Sector: Technology Industry: Software - Enterprise Summary: Coupa Software Incorporated provides cloud-based business spend management platform. The company's platform connects organization with suppliers globally; and provides visibility into and control over how companies spend money, as well as enables businesses to achieve savings that drive profitability. COUP has shown extremely strong EPS and sales growth, quarter over quarter for the last 8 quarters, not to mention, its institutional sponsorship has risen swiftly and consecutively for the last 8 quarters as well. COUP has shown tremendous power since the beginning of 2018 and has been one of the more stellar performers in the enterprise software group over the last couple years. COUP broke out through $67.34 on 1/15/19 and hit an all-time high of $156.16 on 9/6/19, before rolling over and closing below its 65EMA for the first time. That is a gain of 132% in 31 weeks. Also, COUP made a new all-time high of $159.97 on 10/14/19 and is currently building a new base. 6 2019 Model Book INMD Sector: Health Care Industry: Medical Systems - Equipment Summary: Israeli seller of radio frequency devices used in minimally & non-invasive cosmetic procedure/women's health. INMD has exhibited tremendous earnings and sales growth quarter over quarter for the last 8 quarters. Also, INMD’s industry group exhibited notable relative strength throughout 2019. Unfortunately, there is only one quarter of sponsorship data currently available for INMD, so there is no basis for comparison yet. INMD is a recent IPO in the medical systems/equipment group which has been a very powerful leading group for over 2 years. INMD became one of the most powerful stocks in the group very quickly after it went public and is now the most powerful stock in the group with a relative strength rating of 99. INMD broke out through $29.38 on 10/22/19 and hit an all-time high of $58.76 on 11/18/19 for a gain of exactly 100% in slightly less than a month. Keep in mind, INMD was as low as $13.06 when it came public on 8/8/19. So, that would be a 352% gain in just 14 weeks, using its all-time high of $58.76 on 11/18/19. INMD could triple, or quadruple again from here, however, it will have to be able maintain or improve its stellar record of EPS and sales growth for that to happen. 7 2019 Model Book NVCR Sector: Health Care Industry: Medical - Products Summary: NovoCure Limited engages in the development, manufacture, and commercialization of tumor treating fields (TTFields) for the treatment of solid tumors. NVCR got a pass early on even though it was lacking the quarter over quarter EPS growth. Actually, it was devoid of EPS altogether until its most recent quarter. This is because it was a top performing stock in a robust group of leaders, with a great story. NVCR has a state-of-the-art medical technology known as Tumor Treating Fields, which are proving effective in fighting many kinds of solid tumor types, including some of the most aggressive forms of cancer. When a company is drastically changing people’s lives in the way that NVCR has been doing, it’s ok to make an exception for their EPS because everything else is hitting on all cylinders. NVCR is a great example of a stock that stair-steps its way higher in an organized manner, respecting its 21-DMA and 23-EMA the entire way, which makes it much easier to know when to sell. Another benefit of a stock that trades in this manner is that it is much easier to have conviction adding to your position when it pulls back to logical support. It always looks easy in hindsight, but when the general market is under pressure and emotions are running high, the last thing most traders want to do is buy, even when a stock is at logical support. This is why it’s so important to have sound rules and a plan. NVCR broke out through $49.09 on 5/9/19 and hit an all-time high of $98.70 on 8/21/19, which is a gain of 101% in 14 weeks. 8 2019 Model Book PAYC Sector: Technology Industry: Software - Enterprise Summary: Paycom Software, Inc. provides cloud-based human capital management (HCM) software service for small to mid-sized companies in the United States. It provides functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement. PAYC is one of the most fundamentally sound companies in its group. For the last 8 quarters PAYC has shown extremely consistent double-digit EPS and sales growth quarter over quarter as well as annually, not to mention a very high and consistent ROE. PAYC’s institutional sponsorship has grown for 7 of the last 8 prior quarters and is highly populated by high quality holders. PAYC broke out through $137.21 on 1/18/19 and hit an all-time high of $259.71 on 8/29/19 for a gain of 89% in 30 weeks, even after cranking out incredible gains over the prior few years, and it appears to be setting up to continue even higher. 9 2019 Model Book RH Sector: Retail Industry: Home Furnishing Summary: RH, together with its subsidiaries, operates as a retailer in the home furnishings. It offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware, and child and teen furnishings. RH has shown explosive EPS growth quarter over quarter for the last 8 quarters, yet their accompanying quarter over quarter sales have been tepid to say the least. Regardless, the street is still looking for 54% annual growth in 2020, which is comforting given their unusually weak sales. RH broke out through $118.31 on 7/1/19 and hit an all-time high of $243.67 on 12/6/19, for a gain of 106% in 21 weeks. RH exhibited a clear respect for its 23-EMA and 50-DMA as it stair-stepped its way higher in a very organized manner. Stocks that trade this way are typically much easier to hold than stocks that trade in a wide and loose fashion, with little respect for their moving averages. 10 JANUARY ISSUE NO.1 2019 IN THIS ISSUE R O S S T L + H A B E R T E A M
