ChartWatchCentral Stock Picks

Cleaning House

Date: May 5, 2003
Company: ServiceMaster Co.
Ticker: SVM
Price: $9.50
Target Price(s): Initially $10.50, then possibly $11.74 and $13.19
Opinion: Bullish
Comments:Shares of Servicemaster Company (SVM) are currently sitting near a multi-year low, after having lost close to one-third of their market value over the past year. But don't run out and dump this stock, because after bouncing off $8.95 on three occasions since last October, we are now confident this equity has most likely hit bottom. (chart #1)

After successfully testing support last Friday, SVM rebounded 3.5%. As a result, the shares are now approaching a short-term overbought level on the daily chart. (chart #1) The daily chart doesn't concern us too much, because SVM is still very oversold on a monthly basis. (chart #2)

Over the past year, Vice President and General Counsel, Jim Kaput, boosted his equity position from 3,000 to almost 30,000 shares. We don't think his recent purchases should be ignored. After all, his last purchase (July 27, 2000) came precisely when SVM hit bottom, and preceded a 75% surge.

If you are looking to profit from a bullish move, we like the October 7.50 call (Symbol: SVMJU) and October 10 call (Symbol: SVMJB). The safest bet would be to buy the equity, since you will be getting paid a 4.4% dividend (42 cents/share) while you wait for the rebound.


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