Industry Themes And Snapshot Help Find Leading Stocks Early

Investor's Business Daily

To find a needle in a haystack, you use a magnet.

To pinpoint leading stocks before or just starting major price runs, there are equally effective tools.

In the second quarter of 2012, Ocwen Financial (OCN) and Nationstar Mortgage Holdings (NSM) were like needles. The two companies were the top consolidators in the shifting U.S. market for servicing mortgage loans.

The haystack was the market, as it moved from correction to confirmed uptrend in early June 2012. Sheaves of stocks were breaking out of bases.

Ocwen took off and rose more than 250% between a June 2012 and its October 2013 peak. Nationstar launched its advance with a breakout from an IPO base in May of 2012. The stock had gone public two months earlier, and snapped above its of 15.30 on May 14.

The tools to most effectively locate those leaders were found in the pages of IBD and at Investors.com.

A May 17 Industry Themes article noted the week's slug of strong housing data, pointing to Nationstar as the most interesting stock in the sector. It also noted the stock's 13% gain for the week and its 99 Composite Rating.

Ocwen, at the time, was basing after a 16-month advance. It formed a cup base in March through June 2012, topping the 17 buy point on June 5.

On June 11, IBD ran an Industry Snapshot article detailing the mortgage services industry. Ocwen and Nationstar were focal points in the piece, which laid out the status and causes of the industry's consolidation.

Nationstar broke out past a three-weeks-tight pattern in late June.

Industry Themes columns tracked the stocks' progress with two more articles over the next four months. On Oct. 1, the column reported the mortgage services group held the best gain for the third quarter (up 28%) and for the year to date (up 119%) among the 197 groups tracked by IBD.

A month later, another Industry Themes looked at some red flags in Nationstar's chart, and asked whether it might be handing its lead over to Ocwen. Both stocks were consolidating at the time.

Nationstar broke out in early January 2013. From a 32.10 buy point, it would add another 80% to its share value over the next eight months.

A Jan. 28 Industry Snapshot outlined the industry's consolidation. It asked, among other things, how much more market was available in the form of big banks offloading mortgage portfolio assets.

Ocwen topped its 39.35 buy point three days later. It quickly fell back into another base, but would gain 53% from its Jan. 31 breakout to its October high. Industry Themes articles started, in March, to discuss the late-stage traits of the two stocks. On Sept. 18, one day before Nationstar marked its peak, Industry Themes looked into whether the stocks still had room to run.

A Nov. 8 Industry Themes piece detailed the collapse of Nationstar after its third-quarter earnings report. A Nov. 11 Industry Snapshot updated the industry's big picture, explaining more portfolio auctions were likely, but that the initial megawave of consolidation had likely come to a close.

Rates

View Comments (0)