Technology stock

PTC: Best price-positioned technology stock seen by market makers (NASDAQ: PTC)

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Investment thesis

Rapid advances in technology in communications, information processing, organization, and logistics create frequent opportunities for uneven market prices among data systems service stocks. This makes regular reviews of these (many) issues generally a productive field for short-term capital gains.

Among the best potential price changes right now is PTC Inc. (PTC).

The description

“PTC Inc. operates as a software and services company in the Americas, Europe and Asia-Pacific. The Company operates through two segments, Software Products and Professional Services. It offers an IoT platform that enables customers to approach the digital transformation of their operations, products and services through a centralized portal in the cloud. The company was formerly known as Parametric Technology Corporation and changed its name to PTC Inc. in January 2013. PTC Inc. was founded in 1985 and is headquartered in Boston, Massachusetts.

Source: Yahoo Finance

PTC Growth Estimates

Source: Yahoo Finance

Big Picture: Risks vs. Rewards

Figure 1

Reward risk trade-offs

(used with permission)

The trade-offs here are between short-term upside price gains (green horizontal scale) considered worth protecting by market makers with short positions in each of the stocks, and past actual price declines experienced during of the holding of these shares (red vertical scale) . Both scales are percent change from zero to 25%.

The intersection of these coordinates with the numbered positions is identified by the stock symbols in the blue field to the right.

The dotted diagonal line marks the points of equal upward price change predictions derived from Market-Maker [MM] hedging actions and actual worst-case price declines from positions that could have been taken as a result of earlier MA forecasts like today’s.

Our main interest is the on-site PTC [10]. A standard “market index” of reward~risk trade-offs is offered by SPY at [12]. The other actions on the “frontier” of the reward~risk trade-off are the ANSS, also at [12], and AYX to [8]. Some of these stocks are also often referenced by readers reviewing PTC.

These predictions are underpinned by the self-protective behaviors of MMs that typically need to put company capital at temporary risk to balance the interests of buyer and seller by helping capital-intensive portfolio managers adjust multi-billion dollar portfolio volumes. Their protective actions daily define the magnitude of likely expected price changes for thousands of stocks and ETFs.

This map is a good starting point, but it can only cover some of the investment characteristics that must often influence an investor’s choice of where to invest their capital. The table in Figure 2 covers the above considerations and several more.

Compare alternative investments

Figure 2

PTC Peers

Source: Blockdesk.com (used with permission)

Experienced readers familiar with the format and content of Figure 2 may wish to skip the explanatory paragraphs and proceed directly to “Specific investment advantages”

Column price range prediction limits [B] and [C] be defined by MM’s hedging actions to protect the firm’s capital which must be exposed to the risk of price changes from volume trade orders placed by large $“institutional” clients.

[E] measures the potential upside risks for the short MM positions created to fill these orders and rewards the potentials for the buy positions thus created. Past forecasts like this provide a history of relevant risk of lower prices for buyers. The most severe actually encountered are found in [F], during the periods of maintenance in the effort to reach [E] earnings. This is where buyers are most likely to accept losses.

[H] indicates what proportion of the [L] sample of similar past predictions made gains by causing the price to reach its [B] target, or be above his [D] cost of entry at the end of a maximum holding period limit of 3 months. [ I ] gives the net gains-losses of those [L] experiences and [N] suggests how much [E] can be compared to [ I ].

Other reward-risk trade-offs involve the use of [H] win odds with loss odds 100 – H as weights for N-conditioned [E] and for [F], for a combined yield score [Q]. The typical job retention period [J] to [Q] provides a symbol of merit [fom] ranking measure [R] useful in portfolio position preference. Figure 2 is ranked on R among candidate stocks, with PTC ranked first.

Specific investment advantages

PTC’s price performance is primarily driven by its ability to meet all MM sales targets [H] while meeting only a minimum [F] temporary price reductions, as indicated by his superior [T] Risk-reward ratio and favorable location Figure 1. His rapid accomplishments of detention period of more than 8 weeks add to his [R] wealth creation benefit in basis points/day.

Other diversified alternatives, like the mid-market index ETF SPY, may have a better price drop [F] experiences, but pay a cost of diversification in size of its [E] sell targets. That, plus another month of market held by SPY, eliminates any ability to compete in the [R] wealth building portfolio position contest.

The other issues in the table in Figure 2 relate to infrastructure software competitors. The best known and most direct adversary is the ANSS.

On the same comparison criteria, the only one of them approaching the of[R] of PTC is ANSS with a win rating of 95 but average realized wins below the size of the leader. Their CAGRs of 91% AND 74% are multiples of SPY at 24%.

Among the top 20 out of 3,516 predictions for today’s MM price range, the largest realized gains [ I ] of +13.3% and shorter holding periods (36 days) increase their average CAGR to 170%.

Recent Trends in MM Price Range Predictions

September pullbacks from the high prices expected earlier in the year provide PTC with better comparisons of competitive investments versus alternatives. Figure 3, unlike “technical analysis charts” shows daily forecasts likely future price ranges, rather than pass real daily prices.

These predicted price ranges are divided into upside and downside outlooks by the closing price of the current day’s forecast issue. The range index indicates what percentage of this range is below the current market price.

picture 3

Daily forecast of expected price ranges for PTC

(used with permission)

The lower “thumbnail” image in Figure 3 shows the distribution of the past 5 years of MM’s daily forecast in terms of the then-current market price quote for PTC relative to its upper and lower bounds. The current 14 indicates that 14% of the total forecast range is down, while the remaining 86% is up, more than 7 times the downside.

The distribution of these Range Index [RIs] indicate that higher prices are the norm compared to previous experiences of the RI 14.

Conclusion

PTC Inc., as perceived by the market maker community, appears to be one of the most attractive tech software support stocks for short-term capital gain among many top competitors.

Additional disclosure: Peter Way and generations of the Way family are long-term providers of insight information, previously helping professional investors and now individual investors, to distinguish between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside the family, but provide pro bono advice to a limited number of non-profit organizations.

We strongly believe that investors should keep their skin in their game by actively initiating capital commitment choices and time investments in their personal portfolios. Thus, our information presents for DIY investors what the most informed professional investors think. Their insights, revealed by their own self-hedging hedging actions, indicate what they believe is most likely to happen to specific issue prices in the weeks and months ahead. Evidence of how these earlier forecasts worked is regularly provided. Our website, blockdesk.com, has more information.