Checkpoint Systems to be Added to the SMA Portfolio

By on October 23, 2015

The seasonally weak period for the stock market (May through October) is coming to a conclusion. Typically, the November through April months are seasonally strong, although this isn’t set in stone. However, historically, data has indicated the coming six months have a much better chance of outperformance than the previous six month period (link).

As the cash balance of the SMA Portfolio has risen to over 1% of assets, I have decided to utilize these resources to purchase a small stake in Checkpoint Systems Inc. (CKP). According to Yahoo Finance, “Checkpoint Systems, Inc. manufactures and provides technology-driven, loss prevention, inventory management, and labeling solutions to the retail and apparel industries worldwide.”

Several recent additions to the SMA Portfolio have been disastrous. ATW, ESV, GGB, ISH, PGN, RYAM, and TC have all declined by more than 50%. These positions were all based on fundamental factors such as price to book, price to sales, price to earnings, etc. Weakness in the commodity markets made these stock selections prototypical “value traps.” The purchase of CKP is being based on technical factors.

Since 1999, CKP has made a significant bottom between $7 and $8 a share four times (see chart below):

Checkpoint Systems Long-term Chart

A shorter term view of CKP indicates it has made a double bottom this month near the $7 area and has recently moved over the 50 day moving average on above average volume. The relative strength index (RSI) is in an uptrend. Checkpoint Systems has made a stand in this area and could possibly move substantially higher in the next six months.

Checkpoint Systems Short term chart

Disclosure: I have already taken a position in CKP at $7.89 in another account today.

Disclaimer: It is very difficult to outperform a buy and hold strategy. Many investors have found themselves well served over long time horizons by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds. Future performance may not reflect past performance. Profitable trades are not guaranteed. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.

2 Comments

  1. Barron Maestro

    October 23, 2015 at 1:28 pm

    CKP was purchased at $7.81 today and now represents 1.5% of the SMA Portfolio.

  2. Jesse Stone

    October 24, 2015 at 2:29 pm

    Technical analysis is a dubious reason to invest and has been related to the term “gambler’s fallacy.”

    See below link for study showing “Technical analysis is not consistently profitable in the 49 countries that comprise the Morgan
    Stanley Capital Index once data snooping bias is accounted for.”

    http://userfiles.talniri.co.il/ForumFiles/444898.pdf

    Good luck!

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