TOP STOCKS 2015 - MarketSmith

TOP STOCKS 2015

Analyzing Breakouts and Breakdowns

TOP STOCKS 2015

Analyzing Breakouts and Breakdowns

TABLE OF CONTENTS

Introduction

5

Market Index Charts

6

Featured Stocks, Breakouts

15

Annotated Charts

16

Featured Stocks

20

Complete List

86

Featured Stocks, Breakdowns

91

Annotated Charts

92

Featured Stocks

100

Complete List

166

Index

168

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TOP STOCKS 2015

Analyzing Breakouts and Breakdowns

In 2015, investors were affected by a variety of economic events. Outside the U.S., the sharp fall in China's market, continuing economic volatility across the European Union, and dropping oil prices continually rattled the market.

News at home played havoc as well. Early in the year, the market gained after the Fed delayed its decision to increase interest rates, but indecision about an increase later in the year preceded a flash crash on August 24 that set investors on edge--a feeling that never seemed to fully dissipate in Q4. Much like the year itself, IPOs such as FIT started strong then disappointed. It was just that kind of year.

While the Nasdaq finished positive, final performance numbers for other leading indices show their battle scars: ? Nasdaq was up 5.73% ? S&P 500 was down 0.73% ? Dow Jones Industrial Average fell 2.23% ? New York Composite lost 6.42%

Because some key leading stocks of this past market cycle either topped or dropped substantially from their highs, we included a "breakdown" section this year, which enables us to study the topping process. Topping action typically offers multiple sell signals over time, so if we train ourselves to recognize them, we can better minimize drawdowns and lock in our stock's gains around the top--before a bad break evaporates profits.

We create Top Stocks every year to encourage our members to undertake post-analysis of not only their own trades but of the stocks they didn't trade and wished they had. Where possible, we've included company stories to add color to the action. Trading activity is influenced by several factors, and it's putting together these puzzle pieces that makes investing such a rewarding challenge. I encourage you to review the mark-ups by our team for added insight and as inspiration for digging deeper into all the market has to tell us, when we pay attention.

Let's take these lessons with us into 2016 and trade even smarter.

Best Returns,

W. Scott O'Neil President, MarketSmith, Incorporated -5-

Nasdaq Composite-Weekly

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Skechers U S A Inc Cl A

BEST BREAKOUTS

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LendingTree

Mortgage Companies Like Lendingtree Aim to Plant Firm Roots

BEST BREAKOUTS

Source: Corporate Website

The residential housing market is improving. Steadiness, if not quite strength, have helped lure investors into real estate-related stocks. That, in turn, helped lift the Financial-Mortgage and Related Services industry group to No. 8 on Friday among the 197 industry groups tracked by IBD.

LendingTree (NASDAQ:TREE), a provider of online lending services, has delivered strong growth in the past two quarters. Earnings rose 110% and 62%, while revenue stepped up 27% and 31%. Return on equity was 22% to 28% in the past four quarters, marking historic highs. After-tax margin also is at historic highs. The stock is working on a doublebottom base with a buy point of 121.87. Two funds rated A+ by IBD opened positions in Q2, while one added to an existing position and one stood pat. Four A+ funds did some light selling.

A Battle Among Data Providers Group leader CoreLogic (NYSE:CLGX) has a footprint in two important areas: data analytics and mortgage origination. The data and analytics portion of the Irvine, Calif.-based business powers about 60% of its earnings, he said. It includes

everything from reporting on the most effective loan originators in specific geographic markets to tracking levels of distressed sales. CoreLogic also owns the closely-watched Case-Shiller Home Price Index, and has developed other price indexes of its own. That's a growth area, according to Keith Gumbinger of mortgage information provider .

It's not clear who has the better data, CoreLogic or close competitor Black Knight Financial Services (NYSE:BKFS), says analyst with Piper Jaffray Jason Deleeuw, but CoreLogic's data segment generates about $500 million in revenue, while Black Knight's generates $200 million. CoreLogic also provides mortgage transaction services like tax monitoring for servicers and flood-zone data reporting and is benefiting from a rising tide in mortgage originations. The company also has made cost-cutting a priority and has "greatly improved cash flow conversion," Deleeuw said.

The Private Insurer Question NMI Holdings (NASDAQ:NMIH) is the smallest player in the private mortgage insurance market. Its better-positioned, more diversified competitor, Essent Group (NYSE:ESNT), benefited from being the first player to emerge just after the financial crisis when "legacy" insurance companies like Radian (NYSE:RDN) were in trouble, BTIG analyst Mark Palmer told IBD.

But NMI has a lot going for it, Palmer says. For one, it's one of only two investment-grade-rated insurers in the private market. Essent is the other. NMI also passed a federal regulatory test to continue doing business with Fannie and Freddie, although it will need to raise more capital in the future. NMI has also made itself more attractive to originators by expanding the "sunset" period, the time period in

which coverage of a particular buyer can be rescinded if a mistake was made in the underwriting process, to about two to three years, up from the normal industry standard of one year.

The Apartment, Offices Angle HFF (NYSE:HF) taps the real estate story while bypassing many of the nagging questions about housing regulation. The Pittsburgh-based company provides commercial real estate services and capital market services to the commercial real estate sector across the country. HFF mostly specializes in apartments and offices, important because each of those markets is in a different stage of the economic cycle, said Brandon Dobell, an analyst at William Blair.

HFF is keenly aware of the cyclicality of its business, and careful about how it manages cash flow, Dobell said. For HFF, the macroeconomic environment may be the biggest question mark. As Dobell noted, it's not clear when the next downturn will come and companies will no longer need to expand into new offices, or whether the Federal Housing Finance Agency will take a step back from the multifamily market. Rising interest rates could be a slight headwind, although the Federal Reserve is likely to go very slowly with that process.

Adapted from the articles published on October 2, 2015 and October 16, 2015 in Investor's Business Daily.

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LendingTree

BEST BREAKOUTS

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Tyler Technologies

BEST BREAKOUTS

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