Super Stock Blog

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Author: SuperStocker (Page 1 of 14)

JCPenney Affecting Mall REITS

JcPenney (JCP) had a huge drop this morning in stock price over 17% as of right now.  This was due to declines in profit and same-store sales.  Of course, this is having a huge affect on Mall REITs including one that we current invest in Washington Prime Group (WPG).

Washington Prime Group has a very small percentage of rent that comes from JcPenney. This amounts to less than 2% of the rent.  Again, Sears (SHLD) also is a renter of this mall reit but also accounts for less than 2% and most likely without further due diligence I believe sears is only accounting for 1% of the annual base rent that WPG receives on an annual basis.

For someone that has some retirement funds setup, this is a great time to get into Washington Prime Group and collect a massive dividend at over 10%.

For the fundamental trader, this is a great mall reit that should pay off handsomely in dividends and appreciation as there isn’t much more downside to mall reits.  We all know that Amazon (AMZN) wants in the retail space and purchased Whole Foods for billions of dollars.

For the technical trader, there is a bearish cross which means there is further downside.  I’m not too sure about this but it did break the support at $8.50 today so it is possible to get a better price by waiting it out.

Is NexGen Energy poised to be bigger than Cameco?

Nexgen Energy (NXE) is a recent uranium company that has come into my radar.  I posted numerous times about another company called Energy Fuels Inc (UUUU) but Nexgen Energy appears to be in a better fundamental standpoint.  First, it has discovered multiple uranium deposits and the company continues to find more even the past week.  Second, the uranium deposits are of higher quality than the current mines currently out there.  Third, these deposits are close to the same amounts that Cameco (CCJ) and are poised to overtake the amount of uranium in comparison.

Nexgen Energy is a $750 million cap company while Cameco is a $3.7 billion cap company.  If it were to have equal uranium deposits, there is plenty of growth for Nextgen Energy to grow in the future.  It also recently received $110 million in funding from CEF Holdings.  This company is part of a larger conglomerate of businesses controlled by Li Ka-Shing who also is known as the “asian Warren Buffett”.  He invests in many asian countries and knows the market very well.

China is a energy hungry country that is in process of constructing and completing multiple nuclear plants in the next decade.  Li Ka-Shing knows the market going forward and that uranium will be a necessary commodity for China to fuel their nuclear power plants.  It makes sense that he would accumulate shares in this smaller company that would give him a bigger stake in ownership.  I do believe their is a chance of being acquired in the future but the fundamentals show that Nexgen Energy will have a bullish future ahead as well.

Disclosure: I did recently purchase NXE by selling some of my holdings in UUUU.

Is Akamai in for a dead cat bounce?

Akamai Technologies (AKAM) is the largest cloud technology company that helps businesses deliver cloud delivery content through their high-availability servers across the world.  A few days ago, their stock dropped over 13% when their earnings report was released.  The company did hit their numbers but their guidance was lower than analysts expects.  The stock experienced a major drop in the morning after earnings but the company stock price has been steadily moving up since the release.

One major proponent of the stock is the CEO who has multiple million dollar purchases of the stock.  He believes that the price is too low and started these purchase only this year.

Technically, major stock price drops like this usually follow with a “dead cat bounce” which means this stock will continue with the down trend.  If this happens, expect to get the stock as a cheaper price in the following week.  I am not sure if this is a good long-term stock as Amazon and Facebook have been building out their own hardware to replace Akamai’s services.  However, there are many other businesses that use Akamai including Netflix which will definitely help increase their revenues going forward.

Dividend Stock with over 10% Interest

Washington Prime Group (WPG) was once a dividend darling at 12% dividend.  It still sports a high dividend but that is expected to become lower as the price of the stock continues to appreciate.  This stock is an REIT that was hit hard when Macy’s couldn’t hit quarterly numbers including the numerous other mall stores that missed target as well.  These bad earning reports included store closures that affected REITs.  In May, Washington Prime Group hit an stock low below $7.50 which would have given you a nice 13% dividend.

Since May, this stock has had a steady appreciation with it recently going over $9.  Washington Prime Group is a unique REIT that caters to smaller retail plazas that are mostly in outdoor settings.  The Fairholme Fund run by billionaire Bruce Berkowitz invested millions in WPG recently.

For someone that has an IRA, 401k, and another tax-deferred stock account, this stock makes for a nice play.  As much as Amazon has taken so much market share in the retail space, Amazon (AMZN) has also proven that they need to be in brick-and-mortar when they announced that they are purchasing Whole Foods Market (WFM) for $13 billion.

There are other REITS in the similar mall industry that should continue to grow as the fallout disappears and investors see the true value of these mall REITs.  This stock should be a part of an investors’ portfolio for long-term growth in dividend and appreciation.

I plan to purchase shares in any dips in price but I do not own any at this time.

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.

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