Tesoro Corporation (TSO), Krispy Kreme Doughtnuts (KKD), Medidata Solutions Inc (MDSO) – Sell in May, But Don’t Go Away

Outperformers

Luckily, a number of stocks have gone on to exceed expectations. I have already covered the big gainers of Tesoro Corporation (NYSE:TSO), Krispy Kreme Doughtnuts (NYSE:KKD) and Tenet Healthcare. Honorable mention to Obagi Medical Products, which was bought out for a 70% gain on its feature price. The other big winner on the list is Medidata Solutions Inc (NASDAQ:MDSO).

Medidata Solutions Inc (NASDAQ:MDSO) got a healthy boost at the end of last month after reporting record Q1 results. Comparable quarterly revenues were up 26%, with backlog growth of 46% over the comparable year last. 31% year-over-year growth came from application services, which accounted for $50 million in revenue. Customer retention and upselling were key factors in earnings growth. This had exceeded the company’s own expectations: “On the heels of Q4’s record sales performance, our team had the best first quarter in history;” all good signs for the quarters ahead. As a finishing touch, cash holdings also increased by $12 million to $124 million in total. The stock is up over 90% from its original in August 2012.

A cluster of stocks have had a good run over the past few months, but the pick of the bunch is Pinnacle Entertainment. It gained 33% in the past couple of months, to give it an overall 55% return on its feature price. The Ameristar merger is expected to close by Q3 of this year, which will offer $40 million in savings. Revenues increased 6.7% year-over-year, although performance of individual properties was mixed, with weakness usually attributed to remodeling-related disturbances. A new $20 million development is planned for New Orleans, to open in Q2 2014.

Any stock up over 25% in the past couple of months is worth looking at as a covered call opportunity. Nine (out of 104) stocks featured in my articles have achieved this goal. The aforementioned Medidata Solutions Inc (NASDAQ:MDSO) has June $70 calls offered at $1.70, while Pinnacle Entertainment has September $20 calls offered at $1.65.

Summary

For many people, this is great opportunity to restock the cash coffers in preparation for the next move higher. This can be achieved by cutting losers, taking partial profits on gains, or selling covered calls. The next leg down may offer 10% discounts or more, even allowing fresh opportunities to buy back the same stocks for less! Although each major rally is typically led by a different group of stocks. You want to make sure you have the funds to buy the next winners.

The article Sell in May, But Don’t Go Away originally appeared on Fool.com and is written by Declan Fallon.

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