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Tuesday, August 22, 2006

Catalysts that make Sierra Bancorp (BSRR) a potential buy

By Yaser Anwar, CSC of Equity Investmen Ideas

Last Tuesday, i highlighted my growth screen & promised a follow up on each stock if possible. If you didn't get time to peruse the list or need to refresh your memory, click here.I've chosen to analyze. Sierra Bancorp- offers various banking services to individuals and businesses primarily in the central and southern sections of California’s San Joaquin Valley.Catalysts that make BSRR a potential buy:

BSRR's EPS growth for this Q relative to the same quarter a last year was 38.89%. Furthermore, growth from Q5 to Q1 beat estimates, for this year and next, by more than 25%. This bodes well for BSRR.

BSRR has had an annual earnings growth rate over the past five years of 21.32%. BSRR, whose annual EPS before extraordinary items for the last 5 years were 0.75, 0.91, 1.03, 1.31, 1.56. Constantly increasing, another positive

When considering a growth stock, i like to keep an eye open for stocks that are trading within 15-20% of their 52-week highs, as the stock price is potentially close to breaking out to a new high on above average volume. BSRR's current stock price 31.41, is within 15% of the 52-week high 33.37. (I belong to the Buy High, Sell Higher cohort! thanks to Will O'Neal, IBD Founder)
In my growth list, a criteria was RSI of atleast 80 (as i wanted to screen companies with recent strong momentum). BSRR's relative strength trend has been increasing over the last 4 months. BSRR's relative strength of 80 is at an acceptable level & price action is favorable.

I believe upto 40% of stock picking is sector. Like they say, "A good house in a bad neighbourhood is still bad, viceversa." By screening the Regional Banks sector, i noticed there are 50ish companies that have a relative strength at or above 80 & is one of the top performing industries.

For my growth screen, another criteria was high insider ownership. Investors like to place their bets on companies where the management has a big stake in the company (Reminiscent of the Gordan Gekko Speech during Teldar Paper shareholder meeting). Insiders own 36% of BSRR's stock. (Gordon would be proud!)

Disclosure: I do not own the stock

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