Salesforce.com: Buy on a pull-back

Salesforce.com's business model is linked to the overall success of the economy. When the economic recovery was distant, institutional investors (IIs) shunned CRM, which designs software that lowers up-front investment costs, increases vendor accountability, and enables flexible subscription pricing, among other benefits.

However, as it became clear that the U.S. recession was bottoming late this summer, IIs suddenly developed an affinity for CRM, perhaps on the likelihood of stronger-than-expected enterprise information technology spending, and on CRM's market leadership position. The First Call FY2010/FY2011 EPS estimates for CRM are 62 cents to 83 cents.

Technically, CRM's stock chart looks fantastic: a steady uptrend, with minor, constructive pull-backs, and a price that continually stays above the 50-day moving average – a sign that institutional investors are adding to their CRM positions.

However, the stock is slightly overbought, short-term, so buy CRM on a pull-back to $55-57. Keep in mind that shares may not retreat to that level.

Also the Sell/Stop Loss has been raised to $37, or to just under the entry point, form $17.

Stock Analysis: Salesforce.com is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CRM on a pull-back to $55-57, then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CRM position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $37.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.