The strategy we run at HX Trader is a strategy that we have now run for over half a decade.

We have continued to refine our process over that time and continue to see improving results.

One nice aspect of having run a strategy for so long is that we have several names that we have traded many times over the years.

Today’s HX Trader idea is one of those.

A leading company with great operational momentum that we have not traded since way back in 2020.

Here is the idea…

The company is software company, Guidewire Software Inc. (NASDAQ: GWRE). The company offers an industry platform for property and casualty insurance carriers globally.

The company was founded back in 2001 and went public in January 2012 and was one of the best IPOs of that year. Its industry leading software helps P&C insurance carriers run their business more efficiently.

Since coming public the stock has seen solid performance and especially here in the last year. Here is the ten-year chart of the stock price…

The stock performed well into the COVID period but then – like many technology companies – suffered from a post-COVID hangover. Over the last two years, though, the stock has soared and especially in 2024.

The stock has moved higher on the back of solid earnings growth. Here is the table showing GWRE earnings per share or “EPS” over the last decade…

On the table you can see how the company struggled a few years ago but now have seen EPS bounce back to new heights.

This positive operating momentum can also be seen in how their results have compared to analyst’s expectations. Here is a table showing their results those expectations for the last five years…

The company had been losing money but even during that period they consistently exceeded analyst’s expectations. On the table you can also see that they have been absolutely crushing numbers in 2024. This is why the stock had almost doubled year-to-date.

Beating numbers like this also sets it up so the company sees analysts having to increase their estimates. Here a chart showing the stock price and the analysts estimates for 2025 EPS…

The numbers have been consistently moving higher and this is what has helped power the stock price.

Recently, though, the stock got hammered. Here is a shorter-term chart along with our favorite technical indicators – the relative strength index or “RSI” …

The stock sold off from a high over $207 per share to $172 where it is trading right now. That is a -17% return. What happened?

When the company reported their earnings earlier this month they exceeded expectations on every measure. They also raised the guidance.

The issue for the company was that the stock had moved so much higher into the report that the unofficial expectations were even higher than what the company reported. This disappointed some investors, and they sold the stock.

We have seen situations like this many times before. As long as the company continues to beat the published expectations and see higher estimates then the stock will continue to move higher.

The sell off also triggered our RSI “buy” signal of trading below the 30 RSI level and back above it. Here is how the stock has performed when it has done this in the past over the last ten years…

Looking out 90 days the stock has been higher on average double digits and three-quarters of the time. These are good odds and the kinds of bets we like to make in HX Trader.

We think the company will continue its outstanding operational momentum and the stock will recover. We will let the shares guide us to some profits!