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Category: Super Stock (Page 1 of 9)

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.

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.

Bullish on Energy Fuels

This is a relatively small-cap stock that has tons of potential.  The risk versus reward is definitely worth the purchase.  The company is Energy Fuels Inc (UUUU) which is a USA based Uranium company.  Technically, it has had nice volume the past few months.  It has formed a nice V-indicator and its time for it to push the boundaries off the $2.50 price which it currently sits at this time.

Fundamentally, the uranium sector is still at a market low on pricing.  It won’t take much to get this going.  Donald Trump tweeted in November that he wants US to ‘strengthen and expand its nuclear capability.’  If Mr. Trump renegotiates NAFTA, it will cost more to import Uranium from Canada to USA.  Energy Fuels Inc would get a nice boost of customers being in USA and, therefore, not being part of the tariff.  You will bet that Mr. Trump will be most bullish on all USA companies and he will give the most benefits to make sure they grow especially if they can offer more jobs.  Also, internationally, if any relations go sour with Russia other suppliers, they won’t want to import Uranium to us.

UUUU is currently at $2.45.  I bought some today.  It is a small cap that DOES have risk but it is worth the reward.

Great Earnings Report, Dividend Increase, and Great Future Growth!

I mentioned Omega Healthcare Investors Inc (OHI) in an earlier post.  It has dropped 5% in the past couple days giving you an opportunity to buy at a undervalued price.  The company posted earnings recently and beat forecasts by 0.40 EPS.  As we know the market is speculative and sometimes not efficient, therefore, the stock dropped from a recent weekly high of $32.70 down to $30.70.

The stock is sitting nicely at low $31s as of this morning and it still gives you a great price to get in.  Remember, you can take further advantage by purchasing through a tax-advantaged account like a ROTH IRA or Traditional IRA.

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