Existing Home Sales Drop 1.2%

Sales of existing homes fell 1.2% to a seasonally adjusted annual rate of 5.08 million for June, according to a National Association of Realtors (NAR) report released today.

After jumping a revised 3.4% in May, analysts had expected sales to head even higher to an annual rate of 5.27 million for June. Compared to June 2012, sales were up 15.2% and they remain near a 3.5-year high. The numbers include completed transactions on single-family homes, townhomes, condominiums, and co-ops.

As sales slowed, the housing inventory rose 1.9% to 2.19 million existing homes. At the current sales rate, this represents a 5.2-month supply of existing homes, 4% higher than May's supply.

Sales of previously occupied homes in June reflect contracts that were mostly signed in April and May, when mortgage rates were lower. The NAR also noted that first-time buyers, who usually drive healthy markets, aren't participating as much in the current recovery. They made up only 29% of buyers in June, below the 40% that is typical.

But even as sales tapered off, the median sales price moved higher for the 16th straight month of year-over-year increases. June's $214,200 median price tag is 13.5% higher than a year ago, putting sellers in a strategic position. "Rising values have improved the position of homeowners, and 16% of Realtors surveyed in June report they worked with a client that previously had an underwater mortgage," said NAR President Gary Thomas in a statement.

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The median time on the market fell four days from May to 37, and is nearly half the time houses hung out on the market a year ago.

-- Material from The Associated Press was used in this report.

link

Don't Get Too Worked Up Over China Lodging Group's Earnings

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on China Lodging Group (Nasdaq: HTHT  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, China Lodging Group burned $65.8 million cash while it booked net income of $29.7 million. That means it burned through all its revenue and more. That doesn't sound so great. FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at China Lodging Group look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 26.2% of operating cash flow coming from questionable sources, China Lodging Group investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 22.0% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures. China Lodging Group investors may also want to keep an eye on accounts receivable, because the TTM change is 4.5 times greater than the average swing over the past 5 fiscal years.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Looking for alternatives to China Lodging Group? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add China Lodging Group to My Watchlist.

Why Catamaran Is Poised to Bounce Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, health care IT services specialist Catamaran (NASDAQ: CTRX  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Catamaran and see what CAPS investors are saying about the stock right now.

Catamaran facts

Headquarters (founded)	Lisle, Ill. (1993)
Market Cap	$9.9 billion
Industry	Healthcare services
Trailing-12-Month Revenue	$11.4 billion
Management	Chairman/CEO Mark Thierer (since 2012) CFO Jeffrey Park (since 2012)
Return on Equity (average, past 3 years)	11.3%
Cash/Debt	$311.4 million / $1.1 billion
Competitors	Caremark Pharmacy Services Cerner Express Scripts

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 392 members who have rated Catamaran believe the stock will outperform the S&P 500 going forward.   

Just last month, one of those Fools, NHWeston102, succinctly summed up the Catamaran bull case for our community:

Buy-out Bait! An innovative company with a lot of management hustle and lots of little deals with big companies. This is an area that can't not grow, not with the aching need to rationalize health care records and management. Demographics, debt, and management urgency are all behind the [Catamaran].

While you can certainly make huge gains in health care stocks, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Mortgage Rates Slip Just a Bit in Latest Week

David Ryder/Bloomberg via Getty Images WASHINGTON -- Average U.S. rates for fixed mortgages barely changed this week, hovering near historically low levels. Mortgage buyer Freddie Mac said Thursday that the average for the 30-year loan slipped to 4.51 percent from 4.53 percent last week. The average for the 15-year loan edged up to 3.56 percent from 3.55 percent. Mortgage rates have risen more than a full percentage point since hitting record lows a year ago. The increase was driven by speculation that the Federal Reserve would reduce its $85 billion a month in bond purchases. Last month, the Fed determined the economy was strong enough to start cutting those monthly purchases by $10 billion. The bond purchases have kept long-term interest rates low. The rise in mortgage rates has slowed home sales, which have fallen for three straight months. But overall, 2013 represented the best year for the housing market since the financial crisis. Sales of existing homes should reach 5.1 million for last year, the National Association of Realtors forecasts. That would be up 10 percent from the previous year and the most since 2006. It's still below the 5.5 million generally associated with healthy housing markets. Most economists expect sales and prices to keep rising this year, but at a slower pace. They forecast sales and prices will likely rise around 5 percent, down from double-digit gains in 2013.

Can You Trust the Cash Flow at Tuesday Morning?

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Tuesday Morning (Nasdaq: TUES  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Tuesday Morning burned $1.7 million cash while it booked a net loss of $42.8 million. That means it burned through all its revenue and more. That doesn't sound so great.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Tuesday Morning look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

Tuesday Morning's issue isn't questionable cash flow boosts, but items in that suspect group that reduced cash flow. Within the questionable cash flow figure -- here a negative-- plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) constituted the biggest reversal. Overall, the biggest drag on FCF came from capital expenditures.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Tuesday Morning to My Watchlist.

How I Plan To 'Beat The Fed' With Dividends

Many years ago, I lived near the Culinary Institute of America, the alma mater of many of the world's most celebrated chefs. After years of classes, the students' final proving ground was cooking for the institute's public restaurants.

In the 1970s and 1980s, the institute's premier restaurant was the Escoffier Room. It was expensive. And if you wanted to dine there, you had to plan ahead. In many cases, reservations had to be made a year in advance.

Every night, students were expected to deliver culinary perfection. And for the unlucky student assigned to the souffle station, the pressure was immense.

 

In chef Anthony Bourdain's book "Kitchen Confidential," he tells how students prayed every night, hoping to avoid the assignment to make the puffy egg-based dish, which had a tendency to collapse if conditions weren't perfect. To add insult to injury, the domineering head chef would berate any student responsible for a fallen souffle, loud enough for all to hear.

The Federal Reserve is now standing in front of the economic equivalent of a souffle station.

The Fed is likely to maintain historically low short-term interest rates for some time. But based on comments made on May 22 by Chairman Ben Bernanke, the Fed is attempting to figure out the appropriate time to cut back on its program called quantitative easing. Under this program, the Fed has been buying long-term Treasurys and mortgage-backed securities in an effort to hold down long-term interest rates.

In the kitchen, souffles fail for primarily two reasons. If you open the oven door too early, the cool air will deflate a puffy souffle like a stuck balloon. If you whip the eggs too long, you can literally beat the rising energy out of them. In monetary policy, the same risks apply.

The Fed is afraid to stop its asset-buying program too soon, for fear it will start to deflate our slowly rising economy. But after years of quantitative easing, the Fed doesn't want the economy to become too dependent on easy money. For instance, financial institutions have been able to passively borrow money at super-low rates and invest it in high-yielding securities. The Fed wants a more energetic banking sector, one that is motivated to loan money to businesses so that they can expand and hire.

On June 18, the Fed started its much anticipated two-day monetary policy meeting.

On Wednesday, Bernanke held a briefing to try to convince the world that he is not going to open the oven door just yet. He did, however, try to hint to financial institutions that they need to prepare for a time when the Fed will no lo! nger whip out easy money.

The Fed Could Get the Recipe Exactly Right, and Still Scare the Market

Securities markets understand the Federal Reserve's delicate predicament. No matter what Bernanke says at the briefing, investors may continue to wring their hands until they see proof that the Fed's souffle -- the economy -- can stand on its own.

Also, individual investors as well as financial institutions want to stay one step ahead of the Fed. So if Bernanke whispers about slowing quantitative easing, the market may hear it as a shout.

We could see a continued market overreaction in the aftermath of Bernanke's briefing. As a result, dividend-paying securities -- and especially fixed-income securities -- could feel the brunt of it. But much of this will be a short-term phenomenon, and I am in this for the long haul.

Over the last few months, I've pared back some of my portfolio's exposure to longer-duration fixed-income securities. I may continue to cull a few more positions over time if conditions warrant. I've also added some securities that I believe will do well in the road ahead, such as the insurance provider RLI (NYSE: RLI) and semiconductor company Intel (Nasdaq: INTC).

I've also kept my eyes open for new dividend-paying funds that have launched. Fund companies, after all, also want to stay one step ahead of the Federal Reserve. They are working hard right now to provide new products that are appropriate for current and future economic and market conditions -- and tempt income investors like you and me.

Action to Take --> In my upcoming issue of the The Daily Paycheck, I'll be profiling a brand new bond fund that offers a unique kind of interest rate protection. But most of all, I will do what I have always done. I will reinvest my dividends in solid securities with good track records for providing a stable and/or growing dividend stream. On days when the market dips, I'll have the opportunity to reinvest to purchase m! ore share! s at lower prices and higher yields. And every month, I'll have more shares generating even more dividends.

No matter what Bernanke says -- or how the markets parse his words -- his goal it to get to a highly functional economy. And in the end, that will benefit all securities.

The Culinary Institute's souffle station may have been stressful and hectic. But when I had the rare opportunity to dine at the Escoffier Room, I assure you -- my souffle was always perfect.

P.S. -- Here's one more reason why I'm not worried -- I'm utilizing an income strategy called the "Dividend Trifecta." With it, I've been building my portfolio for more than three years, earning more than $47,900 in total dividends so far. To learn more about how you can do the same, see my latest presentation here. 

Here’s How to Play Disney Stock Now

Say goodbye to Cinderella and Snow White. Thanks to superheroes and Jedi Knights, Walt Disney (NYSE: DIS  ) stock has never before reached such heights.

Officially, the shares touched an all-time high of $67.89 a share on May 16 -- not even two weeks after Iron Man 3 took the box office by storm. The film has since passed the billion-dollar mark in gross receipts worldwide, leaving fans clamoring to get Robert Downey Jr. back for a fourth go as the Armored Avenger. Mix in theme parks, ESPN, ABC, and a new Star Wars film with $2 billion potential and Disney starts to look like one of the great growth stocks of the next several years.

But investing is also a game best played in context. How does Disney stock compare to peers Time Warner (NYSE: TWX  ) and News Corp. (NASDAQ: FOXA  ) ? Here's what the numbers say:

Key Statistics Walt Disney Time Warner News Corp.

Current Share Price	$65.06	$58.72	$31.87
Shares Outstanding	1.80 billion	932.2 million	2.32 billion
Market Cap	$116.1 billion	$54.0 billion	$72.5 billion
Trailing P/E Ratio	19.76	18.05	12.75
PEG Ratio	1.49	1.26	1.25
Gross Margin	21.2%	45.6%	37.8%
Cash From Operations	$7.72 billion	$3.76 billion	$3.83 billion

Sources: S&P Capital IQ, Yahoo! Finance.

And here's what Fools say, going by the data available in our CAPS investor intelligence database:

CAPS Category Walt Disney Time Warner News Corp.

CAPS Stars (out of 5)	*****	**	**
No. of CAPS Ratings	5,869	1,259	155
Bullish CAPS Ratings	5,520	1,068	126
Bearish CAPS Ratings	349	191	29
Bull Ratio	94.1%	84.8%	81.3%

Source: Motley Fool CAPS.

Disney, at five stars, is easily the top-rated stock of the bunch. The company's $40 billion licensing machine deserves at least some of the credit.

"Disney has always had the Midas touch when it comes to merchandising and with Star Wars and Marvel, the possibilities are endless," writes CAPS investor Scribblesink. "Look for Disney to bring in an amazing profit on their merchandising in the future. And let's not forget Pixar -- yes, Disney will outperform."

Fool pramathmalik adds that Disney has a "unique position" in the content business, and as a result, "huge monetization potential." I agree.

Verdict: Disney stock is a buy
Skeptics will note the huge run-up in Disney shares as a signal to hold off on buying. I'm not so sure. Yes, the stock trades for a premium at nearly 20 times earnings, but Star Wars is one of the top-earning film franchises of all time. And while Marvel has enjoyed two consecutive billion-dollar hits, remember we're still at the beginning of "phase 2" of the development of the Marvel Cinematic Universe. At least three phases are planned.

Will the House of Mouse's big-name entertainment properties provide enough cheese for investors? Let us know what you think of Disney's fantastical franchises, and whether you'd buy, sell, or short Disney stock at current prices, using the comments box below.

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JinkoSolar Holding Beats on Both Top and Bottom Lines

JinkoSolar Holding (NYSE: JKS  ) reported earnings on June 7. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), JinkoSolar Holding beat expectations on revenues and exceeded expectations on earnings per share.

Compared to the prior-year quarter, revenue expanded. Non-GAAP loss per share dropped. GAAP loss per share dropped.

Margins grew across the board.

Revenue details
JinkoSolar Holding chalked up revenue of $187.3 million. The two analysts polled by S&P Capital IQ wanted to see sales of $168.3 million on the same basis. GAAP reported sales were 11% higher than the prior-year quarter's $168.2 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at -$0.56. The two earnings estimates compiled by S&P Capital IQ predicted -$1.06 per share. Non-GAAP EPS were -$0.56 for Q1 compared to -$2.36 per share for the prior-year quarter. GAAP EPS were -$0.93 for Q1 compared to -$2.55 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 12.7%, much better than the prior-year quarter. Operating margin was -1.4%, much better than the prior-year quarter. Net margin was -11.1%, much better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $298.8 million. On the bottom line, the average EPS estimate is $0.18.

Next year's average estimate for revenue is $1.09 billion. The average EPS estimate is -$0.58.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 119 members out of 170 rating the stock outperform, and 51 members rating it underperform. Among 28 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 12 give JinkoSolar Holding a green thumbs-up, and 16 give it a red thumbs-down.

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Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on JinkoSolar Holding is hold, with an average price target of $6.90.

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Is Hewlett-Packard a Great Stock for today's Dividend Investor?

It's no secret that Hewlett-Packard (NYSE: HPQ  ) is in trouble. The inveterate computing giant suffers from the waning PC market like many other sector titans, but that downtrend came at a particularly bad time for this company. HP is still reeling from the revolving-door management policy since ex-CEO Mark Hurd left the company in shambles, and current leader Meg Whitman admits that putting the pieces back together is both difficult and time-consuming.

Sales are shrinking. GAAP earnings have turned negative. Share prices are down 47% in the last three trouble years, taking 168 points off the Dow Jones Industrial Average (DJINDICES: ^DJI  ) in the process. The market capitalization has dwindled from more than $100 billion to the third-smallest cap on the Dow.

HPQ Market Cap data by YCharts.

So the storm clouds are building on HP's immediate horizon. But all is not lost -- not yet.

With all of these standard metrics collapsing at once, it's easy to overlook HP's bright spots. In particular, the free-falling share price and last year's huge earnings writedown combine to mask the fact that cash flows took a sharp turn in the right direction.

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HPQ Free Cash Flow TTM data by YCharts.

HP generated $9.9 billion in free cash flow over the last four quarters. That's a middling performance among the elite companies on the Dow (16 out of 30, to be exact) but a stellar result in relation to the wider market. HP's free cash machine places in the top 5% of the S&P 500, for example.

Pair this fountain of cash with an admittedly not-so-buoyant history of dividend increases, and you'll see that HP spent just 10.7% of its free cash to fuel that 2.4% dividend yield. That's the third-lowest cash-payout ratio on the Dow, where financial specialists are always rolling in piles of fresh cash. The lowest cash ratio, for reference, goes to Bank of America (NYSE: BAC  ) -- a paltry 6.8% of its free cash flows go to income investors. But the megabank is still waiting for government approval to raise its payouts, and most of its business takes place below the free-cash-flow line on its enormously complicated financial statements. It's a very different situation at HP, where cash flows form the most important bottom line of all, and no regulator is keeping its dividend policies back.

Dividend investors might wonder what would happen if HP's board authorized a more generous set of increases, given all that cash-based headroom. In fact, Whitman and other recent HP chiefs have supported that strategy, while Mark Hurd largely left it untouched. Dividend payouts have jumped 82% in three years after flatlining for years.

HPQ Dividend data by YCharts.

So HP's cash flows are surging, largely ignored, with plenty of headroom to increase dividend payouts even further. This moderate yield could -- and arguably should -- spike, even if the turnaround story doesn't play out. That makes HP an intriguing pick for dividend investors with their eyes on the Dow 30.

The massive wave of mobile computing has done much to unseat the major players in the PC market, including venerable technology names like Hewlett-Packard. However, HP is rapidly shifting its strategy under the leadership of CEO Meg Whitman. But does this make HP one of the least-appreciated turnaround stories on the market, or is this a minor detour on its road to irrelevance? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.

Housing Starts Slide 16.5% for April

Housing starts took a 16.5% nosedive to a seasonally adjusted annual rate of 853,000 for April, according to a Commerce Department report (link opens in PDF) released today.

After heading up an unrevised 7% for March, analysts had expected a slight 6.5% drop to 969,000 for April.

Source: census.gov. 

While housing starts disappointed, new permits in April point to potential growth ahead. Permits increased 14.3% month-to-month to a seasonally adjusted annual rate of 1.017 million, beating analyst estimates by more than 70,000.

Privately-owned housing completions in April were at a seasonally adjusted annual rate of 689,000, 14.3% below the revised March estimate.

In the past 12 months, permits have jumped 35.8%, while housing starts are 13.1% higher. Housing completions in April clocked in 3.3% above April 2012. This latest report comes a day after future home sales expectations were reported to be at five-year highs.

link

SolarCity Set to Soar Even Higher

CHARLOTTE, N.C. (Stockpickr) -- When a a stock such as SolarCity (SCTY) surges 23% to $47.44 on a Friday morning, there must be a reason. Let's approach this favorable long trade with a blend of technical and fundamental analysis.

First off, you do not want to short this stock. I am seeing it as a trade from the long side with an entry of around $42. SCTY has 25% of the float that is short, and while many of these shorts may have covered today, I could see the level increasing back to or even surpassing 25% as the stock sees higher prices, pushed by stubborn hedge fund managers who see "no future" for the stock and refuse to believe that charts that are rising continue to rise.

SCTY's technical chart also points to higher prices. Stocks that increase on volume of greater than 30% the average daily volume typically signal a pivot point and higher prices. The previous resistance of $52.77 becomes the first upper resistance, but I will call it $50 for a cautious estimate. The mighty uptrend behind this stock on a yearly chart will cause the stock to continue back to its previous highs and higher.

Now for some fundamentals. Solar City, which has more than 1600 employees, designs, finances and installs solar energy systems and also builds out stations to charge electric cars. The company is projecting an increase for 2014 of close to 90% growth in the deployment of its annual installed capacity of photovoltaic projects. This is the kind of growth that brings equity holders large returns. I am assuming that SolarCity plans to continue with its current growth and momentum.

The key is return on equity and return on investment. Management needs to make sure it is adding value to the shareholders through sales and managing debt. If SolarCity keeps its growth up at 90% per year, the stock could triple in the next two years. Stocks grow as companies grow, but managing debt and margins while increasing sales is key to fast-growing stock prices.

Many of these companies do equity offerings at the top of the stock's move to raise cash to grow the company further. Though this could pull the stock down, it could be a great long-term move for growth. SCTY on a pullback to $42 and finds support there could be a great add to your portfoli.

At the time of publication, author had no positions in stocks mentioned.

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Trader Ben Brinneman, featured on MarketWatch, Bloomberg and Reuters, resides in Charlotte, N.C., and is the owner of C Squared Trading. Brinneman started his career trading bonds for U.S. Bancorp and was an analyst for a wealth management firm. Brinneman and his team at C Squared Trading have taught hundreds in a one-on-one mentorship setting via Skype or live in Charlotte.

You can follow some of their free trades and tips on Twitter at @csquaredtrading.