My SEPA and CANSLIM Analysis of the Intuit (INTU) Trade
- lavorgna3
- Apr 24, 2024
- 3 min read
Trend
When I entered the Intuit (INTU) trade on January 21, 2024, the stock price was above the 50-day, 150-day, and 200-day moving averages, indicating an established uptrend that aligned with the SEPA trend criteria.
Fundamentals
Intuit's most recent quarterly results (Q4 2023) were impressive, with earnings per share (EPS) growing 18% year-over-year to $2.20 and revenue increasing 14% to $2.67 billion. The company also saw its profit margins expand during this time, exhibiting the strong fundamental performance that is a key component of the SEPA and CANSLIM strategies.
Catalyst
This seems to be where this stock may have fallen short. There isn’t a clear catalyst that I can see in hindsight.
Trading Volume and Price Action
During my holding period from January 21 to February 29, 2024, the trading volume for Intuit's stock appears to have been relatively high and increasing compared to its historical average. This would typically be a positive signal, as high and rising volume can confirm the strength of an uptrend.
However, the fact that the stock price ultimately declined slightly during my trade suggests that the volume dynamics may not have fully aligned with the price action. Decreasing volume in an uptrend can sometimes signal that the trend is losing momentum and a potential reversal may be on the horizon.
Institutional Ownership
The search results indicate that Intuit has a high level of institutional ownership, with major investors such as The Vanguard Group, BlackRock, and State Street Global Advisors holding significant stakes in the company. This institutional sponsorship is an important factor in the CANSLIM framework.
Market Environment
The overall market environment during the January 21 to February 29, 2024 period was generally favorable, with the S&P 500 index gaining around 5% over that time frame. This suggests the broader market conditions were supportive of my Intuit trade.
CANSLIM Analysis
Looking at the CANSLIM framework:
- Current Earnings (C): Intuit's recent quarterly earnings growth of 18% met the CANSLIM criteria.
- Annual Earnings (A): The company's consistent annual earnings growth of over 25% in recent years also aligned with the CANSLIM approach.
- New Products/Services/Management (N): The information I have does not indicate any significant new developments at Intuit during the trade period, making it difficult to assess this CANSLIM factor.
- Supply and Demand (S): The increasing trading volume during my holding period suggests strong demand for Intuit's shares, but the eventual price decline indicates the supply-demand dynamics may have shifted.
- Leader or Laggard (L): As a dominant player in the financial software industry, Intuit would likely be considered a market leader, satisfying this CANSLIM criterion.
- Institutional Sponsorship (I): The high level of institutional ownership in Intuit's stock is a positive factor in the CANSLIM framework.
- Market Direction (M): The overall market environment during the January 21 to February 29, 2024 period was generally favorable, which would have been supportive of my Intuit trade.
Conclusion
While Intuit appears to be a high-quality company that met some of the key SEPA and CANSLIM criteria, the lack of a clear catalyst and the potential issues with the trading volume dynamics and entry/exit points make it difficult to fully assess how well my trade aligned with these investment strategies. The small loss on the trade suggests there may have been some challenges in executing the trade according to the principles of these approaches. However, the strong fundamentals, institutional sponsorship, and favorable market environment were positive factors that contributed to the investment decision.
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