A Case Study – OPFI – CL Equities

As an active investor, I'm always on the lookout for promising stock opportunities that align with my preferred trading strategies. Recently, I came across OPFI, a financial technology company providing online lending and credit services. Intrigued by the stock's momentum and the company's growth prospects, I decided to take the plunge and add OPFI to my portfolio.

 

Identifying the Entry Point with SEPA

The SEPA (Specific Entry Point Analysis) strategy, developed by renowned trader Mark Minervini, focuses on pinpointing high-probability entry points with favorable risk-reward ratios. When I first evaluated OPFI through the SEPA lens, a few key factors stood out:

1. Trend: OPFI appeared to be in a clear short-term uptrend, having climbed from around $3 per share in the prior month. This aligned with the SEPA requirement for a well-defined upward trajectory.

2. Fundamentals: OPFI's recent earnings and revenue growth looked solid, indicating the company was exhibiting the kind of superperformance characteristics that the SEPA strategy seeks.

3. Catalyst: The company had recently announced the launch of a new lending product, which could have been the type of positive catalyst that the SEPA approach looks for to drive institutional interest.

4. Entry Point: Buying OPFI at $3.87 seemed to represent a low-risk entry point, with the stock trading near recent support levels and exhibiting positive momentum.

With these factors in place, the SEPA framework suggested that OPFI could be a promising investment opportunity worth further consideration.

 

Applying the CAN SLIM Principles

In addition to the SEPA analysis, I also evaluated OPFI through the lens of the CAN SLIM strategy, popularized by the legendary investor William O'Neil. This comprehensive approach examines several key criteria for identifying winning stocks:

1. Current Earnings: OPFI's most recent quarterly earnings report showed strong year- over-year growth, meeting the CAN SLIM requirement for robust current financial performance.

2. Annual Earnings: The company had demonstrated consistent annual earnings increases over the past few years.

3. New Product: OPFI's launch of a new lending product could have been viewed as a positive catalyst under the CAN SLIM framework.

4. Supply & Demand: There were signs of institutional buying interest in OPFI, as the stock had seen increased trading volume and price appreciation.

5. Leadership: OPFI appeared to be outperforming many of its peers in the fintech/lending space at the time of my purchase.

6. Institutional Sponsorship: The stock had attracted ownership from several notable institutional investors, a hallmark of CAN SLIM's emphasis on strong institutional support.

7. Market Direction: The overall market environment was relatively strong when I bought OPFI, providing a conducive backdrop for the trade.

Taken together, these CAN SLIM characteristics painted a picture of a stock that could potentially deliver market-beating returns.

 

The Outcome and Lessons Learned

Ultimately, my OPFI trade resulted in a 10%+ loss on the same day, a disappointing outcome that highlights the inherent unpredictability of the markets. While the stock initially appeared to align well with both the SEPA and CAN SLIM frameworks, the rapid decline serves as a reminder that no investment strategy can guarantee success.

However, this experience has reinforced the importance of proper risk management, diligent research, and a disciplined approach to investing. Even when a trade seems to tick all the right boxes, market conditions can shift quickly.

As I move forward, I'll continue to leverage the insights of SEPA, CAN SLIM, and other proven investment strategies to identify promising opportunities. But I'll also maintain a healthy respect for the market's volatility and the need to protect my capital, even when the initial analysis seems to point towards a winning trade.

It would have been easy to analyze one of my winning trades for the first blog post, but I decided to tackly these in the order of selling. That mean’s a group of losses to analyze before coming across my big winners so far in 2024. Stay tuned.

Works Cited

 Minervini, Mark. "Specific Entry Point Analysis (SEPA)." Minervini Private Access, https://www.minervini.com/specific-entry-point-analysis-sepa.

 O'Neil, William J. "How to Make Money in Stocks: A Winning System in Good Times and Bad." McGraw-Hill Education, 2009.

 O'Neil, William J. "The CAN SLIM Investing System." Investor's Business Daily, https://www.investors.com/how-to-invest/investors-corner/can-slim-investing-system-how-to-invest-in-stocks/

 Minervini, Mark. "Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market." McGraw-Hill Education, 2013.