Super Stock Blog

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Short-Term Bottom on Omega Healthcare

With almost a 8% dividend (7.8% at the time of this writing), Omega Healthcare (OHI) makes a nice stock to own in your retirement portfolio.  It recently hit a short-term bottom at $32 and has been slowly moving back up.  There is plenty of noise about buyers trying to get in at $28 which would be a great level but highly unlikely to get to that point.  Yellen has mentioned that she plans to raise rates in September which should be a tiny raise and should not affect the pricing of this stock.  Remember, the baby boomer generate is continuing to retire and move into senior housing which will benefit this stock.

Rite-Aid Becomes Long Term Hold!

Rite-Aid (RAD) just announced earnings and, more importantly, discussed details of the merger deal.  First, the merger deal is off the table.  Walgreens will be paying $325 million for the termination agreement.  However, Walgreens (WAG) is going to purchase half of Rite-Aid stores for $5.2B.  Rite-Aid retains all of its west coast stores but will sell many stores in the other states.

For the long-term outlook, this is a great play on Rite-Aid.  There is a chance that another company possibly even Walgreens (WAG) in the future would be interested in Rite-Aid with the potential for the west coast stores and to own their pharmacy benefit manager.  Rite-aid is valued over $5 with this current outlook.  As long as they can start growing (which they have not in a long long while), there is the potential to move up to $9 which would be their price two years ago before all this merger and acquisition talk.

It is hard to predict where the stock price will be in the short-term.  However, if you wish to play this long-term, there is potential in Rite-Aid.  If another company wishes to acquire the remaining Rite-Aid, there is a good change you can double your money but don’t expect this to happen anytime soon.

Double Your Return in One Month with Rite-AID!

The Rite-Aid – Walgreens merger saga is coming to an end after two years of merger approval issues.  The end result will be $6.50-$7.00 of cash out per each Rite-AID (RAD) share.  I believe it will end up being at $6.50.  The stock is trading currently at $3.83 which means you will double your money on closing.  The only thing that can hold this up is if FTC blocks the merger.  With Amazon coming to the retail pharmaceutical business, I do not see an argument that FTC can make to block the merger.

The FTC would be doing a disservice to prevent this merger.  Amazon already has a hold of the retail market.  It wouldn’t be tough for them to change their structure to take over the pharmacy business as well.  Amazon can easily make a subscription model to customers that need antibiotics, cough syrups, medicines, etc. without going to your local CVS, Walgreens, Fred, Rite-AID, etc.  that would be cheaper and require less employees.

If you like to gamble, feel free to pick up some Rite-AID (RAD) shares.  The company is also coming out with earnings on Thursday so there is a lot of public news that will be out this week and next week.  The price was recently at $4 a share but has gone down to $3.81 this morning making this a good purchase.  If at worse case they do not merge, Rite-Aid will definitely go down to $2 per share which would still be a nice buy for a company that other competitors are interested in purchasing.

Disclosure: Long RAD stock and Long with RAD naked puts

Major Drop in Rite-AID!

There has been a huge sell-off in Rite-Aid (RAD).  A few days ago it was trading at over $4.50 but now it is trading close to $3.80 with more downside expected.  I would not recommend purchasing this stock anymore.  However, there is a great volatility which means there is also great option value in the stock.  Earnings is expected to be on 4/25/17.  This is a serious date that will move Rite-Aid violently up or down.

How to play?

I wouldn’t recommend purchasing the stock.  There’s too much variables in play that can cause this to move higher or lower that would end up making you sell.

Instead, I recommend looking at the August and October Strike price at the $4 or $3.50 to do a naked put.  I see this playing out in two ways.  In scenario one, you will get a nice premium when it sells at $6.50.  You will have collected it when you sold the naked put and now you will be happy that you are done with the stock.  In scenario two, the stock drops further and you end up owning the stock.  In this scenario, you will need to have enough reserves to make sure you can purchase the stock.  Scenario two will require patience and a long-term view that Rite-Aid will go up in the future.  A great earnings report will help prove scenario two as well.

I wouldn’t recommend you getting into this stock today.  I think it is better to give the weekend to plan your attack and due diligence.  Then you can execute your strategy on monday before earnings.  For those that are more conservative, wait until earnings comes out before making your play.  It might end up making more sense to play options after earnings comes out with the volatility playing to your advantage as well.

Disclosure: I do own RAD naked puts at $4 strike currently.

 

 

MMmm… Burgers…. to the Habit

I mentioned in the past article that HABT was a nice pickup at $15.75.  Even before that it had a bottom in the $13.20 but we cannot be all fortune tellers and we need to use the knowledge of both fundamentals and technicals to make our trades.  Now, HABT is trading at at high $17s and I still think it is a great time to get in.

For those that are more conservative, I would wait for the dip.  I cannot tell you I expect a dip to even come with a double-bottom already in place.  For the buy and holds, I expect this to return nicely.  You already saw that Panera Bread was recently bought out for $7 billion dollars to be brought into a privatize institution.

Now is the Right Time for Rite-AID

I’ve been reading about the merger between Walgreens (WAG) and Rite-AID (RAD) since last year.  I never was too interested in taking a position in this merger & acquisition candidate but with the recent sell-off the risk vs. reward is much better now.  I am also more confident in seeing a happy-ending to this scenario.

Originally, Walgreens was going to purchase Rite-Aid at a all-cash offer of $9 per share.  At that time, Rite-Aid was selling for over $6-7 which offered a nice 10% return to investors.  However, FTC didn’t like the deal and told Walgreens that they had to sell more stores to Fred or they won’t allow the purchase to take place.  Walgreens already said agreed to sell 800 stores to Fred.  FTC wants them to sell at least 1000 stores.  This also means that Walgreens will give less cash to Rite-Aid.  After hearing about this news, many investors holding Rite-Aid for over a year awaiting the merger and others holding the stock option gave up and sold their shares.

Now, the current price of Rite-Aid is around $4.50 (give or take a few cents) and Walgreens is planning to give $6.50 to $7.00 cash per share depending on the number of stores they need to divest to Fred.  There are a few different ways to take advantage of this opportunity.

First, Walgreens is actually in a better position.  They can get rid of more stores that they do not want.  Fred is happy to take over these stores since they want smaller stores that Walgreens would consider smaller towns that they are happy to give up and give less money to purchase Rite-Aid.

Second, Rite-Aid stock price is very undervalued now that even other acquirers should start throwing a deal out on Rite-Aid if Walgreens fails to acquire the company.  Rite-Aid does have a lot of debt but for the right investor they could use that debt as a write-off and still win at the current stock price.

Ok, let’s look at the returns.  At a price of $4.60 and a cash out of $6.50,  you are getting $1.90 per share giving you a return of 41%!  That’s great!!  However, if you want to get even more leverage and play a little safer as well, you can sell naked August 2018 Puts at a strike price $4 for around $0.65 so you would get a nice $650 for 10 contracts.  At worse case, the stock drops and you have to purchase at $4 but you already have $.65 so your stock basis would actually be $3.35.  I think this gives you plenty of wiggle room to wait until the stock price appreciations.

I think Walgreens or some other acquirer would be interested in this company.  I also think Rite-Aid can run on its own and figure a solution to get the price higher.  Either way, I feel the current price is a good one to get into Rite-Aid.

Disclosure: I do have naked puts in Rite-Aid currently and plan to purchase some stock for a long-term play.

Upcoming Super Stock: The Habit

My first visit to the Habit Burger Grill was in Santa Barbara, CA.  At that time, they were not publicly traded.  They weren’t located in multiple states.  They were the local favorite joint for luncheon.  Every table was taken.  They always had a line out the door.  The reason: they have great burgers and they give a lot of value for the price.  You can get a restaurant quality burger at a fast food price.  You can get restaurant style onion rings and french fries which means fresh taste and bigger portions.

The Habit (HABT) is now publicly traded and they are in multiple states.  They are planning to open multiple stores every year.  Consumer Reports rated them “Best Tasting Burger in America.”  They became a publicly traded company over 2 years ago.  Their stock price was over $40 in the first year.  Now it trades undervalued at $15.75.  It was at a low $13.20 within the past 52 weeks.

I believe this stock has hit the bottom.  People loves their burgers but they do not love the stock.  It is at a price where it has no where to go but up.  It might take many years for it to appreciate but you can already see within the past couple weeks that investors are starting to build positions in the company.

Disclosure: I am long HABT and plan to purchase more in the future.

Cheap Price to Get into the Future Uranium Boom

You may have noticed my most recent posts (new highs and bullish view) have been regarding Energy Fuels (UUUU).  You should be able to read those two posts to see why I’m bullish in this stock company.  The price is currently at $1.90 which is really cheap.  Technically, there is a lot of volume in this stock and I believe it is being accumulated slowly by bigger hedge funds.  President Trump has mentioned that the USA needs to become a strong player in the uranium market for both military and for clean energy.  It still plays well into carbon emissions as well.

Disclosure: I do own shares in UUUU.

Fannie Mae – Return > Risk

This week has shown quite a lot of volatility in US’s main housing mortgage companies Fannie Mae and Freddie Mac.  I, in particular, look at Fannie Mae as it is a bigger of the two companies but both have been taking big swings to the upside and downside recently.  FNMA, Federal National Mortgage Association, recently this month almost as high as $4.50 but this week recently dived as low $2.50.  The recent drop was from a court case that showed the appeals court upheld a decision to deny hedge funds the right to challenge government-sponsored enterprises’ (GSEs) net worth sweep.

There is still a lot of work going into this case.  FNMA sits at $3.07.  If this ends up being bullish, it could bring FNMA at least 5x the current levels.  You also have the risk of losing all $3.07 as well.  There is plenty of risk in this one but you will have lots of angry people if the government does not do this one correctly.  FNMA is a major part of the 30 year mortgage that would essentially go away if the company wasn’t recapitalized properly.

I wouldn’t put too much in this trade but I do think you can put a little here and end up with a nice capital gain or a small capital loss at the end.

Energy Fuels Reaching New Highs

As I discussed earlier, I was expecting to see new highs on UUUU with the volume and technical indicators turning bullish.  It is currently at $2.66 with a move up of 6% in this morning.  Expect this stock to continue to go up and down but the long-term road is for it to keep moving up.  Bet on US especially if you have the POTUS planning his executive orders to be made for “America to win.”

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