AVT - Avnet $63.50 (+0.56 last week)

By being the second largest distributor of electronic components and computer products in the United States, Avnet is a huge beneficiary of the trend of specialization. Why distribute products when your company is really better at innovation and why bother innovating if you can operate more profitably by being a distributor? Last quarter Avnet earned a solid $1.48 per share which beat estimates by four pennies. The next earnings report is not until November but estimates are anticipating earnings to nearly double versus the same quarter a year ago. With a P/E just under 13 and a monster growth rate, Avnet appears to be somewhat undervalued at current levels and may offer a bit of a value in this rocky market where high valuation stocks could be very vulnerable to profit taking. Our primary interest in this stock is to try and capture a quick split run. The stock is scheduled to be split 2:1 on September 28th. We also like the fact that the stock managed to tack on a small gain last week when so many other technology related stocks were beaten with thick sticks. Also helping AVT last week was a little good press. Information Week magazine ranked Avnet 4th overall and first in its class, distribution, in its 12th annual compilation of the 500 largest and most innovative IT users. Technically, Avnet has suffered a series of three declining tops that go back to late April. The current flag pattern that the stock has developed could indicate that the stock is ready to break this downtrend line and begin the task of working its way back up to its high of $81.13. The first order of business is to take out last week's high of $65.13, which could spark a round of buying, especially with a split just around the corner. The 50-DMA, which was in a downtrend, has finally leveled and should provide some decent support at $60.25. We are setting our stop just below this support at $59.00. The MACD is moving nicely higher and the RSI is a long way from indicating an overbought condition. One long term negative is the Money Flow, which has been pretty ugly. Having said that, we are just looking for a quick pop before the split. If we are not stopped out, we will exit this position just prior to the September 28th payable date. If the stock breaks through resistance, you can check our In Play section for a trailing stop idea.

Picked on September 17th @ $63.50 Change since picked +0.00