Sallie Mae, orSLM Corp. (
) as it is formally known, is working on a stage-two base.
As a stock advances, it pauses to consolidate. Research shows
that breakouts from the first or second bases are more likely to
work than later-stage patterns.
The current cup-with-handle pattern is 16% deep but would be
much shallower if not for a wild day in late May. The stock
gapped up May 29 in heavy volume. The stock price rose 14% but
reversed to close with a 2% gain. News that the company would
split into two publicly traded entities drove the action.
One company will service federal student loans. The second
company will focus on private loans.
SLM expects to complete the split in the first half of
Sallie Mae was created in 1972 as a government-sponsored
entity. The company was privatized in steps from 1997 to the
final phase in 2004. Sallie no longer has any legal ties to the
Earnings per share increased 92% in the second quarter -- the
fastest growth since late 2009. Revenue popped 15%. After-tax
margin rose to 23%, the highest since late 2010.
The percentage of loans written off was 2.7%, an improvement
from 3.1% in the year-ago quarter.
Return on equity, a gauge of financial efficiency, was almost
21% last year, well above the 17% minimum associated with top
Sallie Mae suspended its quarterly dividend of 25 cents a
share after the first quarter of 2007. However, the dividend was
returned at 10 cents a share in mid-2011. Since then, the company
has raised the payout twice.
The current quarterly payout of 15 cents is an annualized
yield of 2.4%. SLM told IBD on Wednesday that the dividend
policies -- when SLM splits into two companies -- will be
finalized at a later date.
The buy point in the base is 25.24, but the pattern shows more
distribution than accumulation.