This Stock Is Literally a Cash Machine

Next time youre in a convenience store, take a close look at the small
free-standing ATM near the door. Maybe hang out a little while and enjoy a
hotdog or bag of chips so you can take a close look at whos using those machines
and how often. You may learn something that can make you some real money. Those
little cash machines are currently churning out big profits for shareholders of
Cardtronics (NASDAQ: CATM ). If you ever wondered whos willing to pay the "big
fees" for withdrawing money from these machines, you may want to take a long
look at the debit card in your wallet. Cash machine companies are offering
low-cost or no-fee products to consumers that could knock debit cards off their
perch as the leading way to pay for retail transactions. The market for this
kind of access to cash is large, profitable and growing, and the biggest player
in this part of the "fringe-banking" sector is Cardtronics our pick for
buyers looking for growth in today's market. In the near term we expect
investors to push into the stock partially because of all the bad news coming
from the big debit card issuers like Bank of America (NYSE: BAC ). Although it
seems that the big card issuers are backing away from some of the recent fee
increases, theyre actually just pushing those debit card charges into less
obvious places . For example, if you need to replace a lost card, BofA will now
charge you $20 to get one quickly. We don't expect this kind of thing will
fool consumers for very long. Cash is a close second to the most popular way to
pay for retail transactions, and if debit cards are cost-prohibitive, ATMs
become even more important to consumers. CATM not only operates the largest ATM
network in the U.S., it also has products consumers can use for no-fee access to
ATMs around the country. These days the adage of "cash is king" has never
been truer. The stock popped nicely on third-quarter earnings earlier this month
and has since consolidated into a classic pennant formation. In the chart below,
you can see what the stock looks like right now and where we would expect prices
to go in the near term if we get the breakout to the upside were expecting. Our
short-term target would net investors 23%, and it could be much more if momentum
takes the stock further. Click to Enlarge The technicals and fundamentals for
this stock look good, and growth prospects are high in the short term. If youre
looking for a way to turn the missteps and bad news of the traditional banking
industry to your advantage you might want to look at CATM, which is steadily
emerging as the more attractive alternative for consumer payments. Options
Alternatives CATM is a small-cap stock with a thinly traded chain sheet. That
isn't a reason not to buy a call option, but it does change how the trade is
set up. In a situation like this, we recommend looking at the longer-term
expirations and using a limit order to split the bid/ask spread. For example,
the March 2012, 25 strike calls traded on Thursday in between the bid/ask at
$3.20 per share. This creates a lot of leverage that could seriously ramp up
gains if the stock rallies in the short term.