New Watch List Entries

AAL - American Airlines Group

PKG - Packaging Corp. of America

VFC - V.F. Corp.


Active Watch List Candidates

None. We do not have any current active watch list candidates. See below.


Dropped Watch List Entries

AIG, CHK, ITW, and WSM all graduated to our active play list.

We are removing RGR as a watch list candidate.



New Watch List Candidates:


American Airlines Group, Inc. - AAL

Company Info

AAL is in the services sector. AAL is the merger between US Airways and American Airlines (AMR). The new company, American Airlines Group, is the largest carrier with nearly 6,700 flights a day, over 330 destinations, to more than 50 countries, with over 100,000 employees worldwide.

Wall Street was worried about the merger between these two big airlines as the U.S. Justice Department initially tried to block the deal. Regulators feared that new company would be too big, hold too much power, and reduce competitiveness and thus impact pricing for consumers. Fortunately, a U.S. district judge just recently approved a settlement worked out between AAL and the Justice Department where the new company agreed to sell certain assets to competitors. Getting the legal hurdle for its merger out of the way it's one more worry that investors can forget.

Summer is almost here and should mean good news for airlines. In addition to more vacation travelers the industry won't have to worry about so many cancellations. The 2014 winter season was brutal. In January and February the Bureau of Transportation Statistics said 6.05% of all domestic flights were cancelled. That number dropped to 4.6% of all flights cancelled in March. Put them all together and you have the worst winter cancellation rate in 20 years.

The Wall Street crowd is bullish on shares of AAL. Goldman Sachs recently put a $46 price target on the stock. In the latest 13F filings it was revealed that Paulson & Co had raised their stake in AAL from 8.5 million shares to 12.2 million. Meanwhile David Tepper is the hot fund manager everyone loves and his Appaloosa Management has AAL as its second largest holding. In the last quarter Appaloosa increased their AAL stake by 22.5%.

On a short-term basis shares of AAL are sitting just below resistance at $40.00. Tonight I am suggesting we wait for AAL to close above $40.25 and then buy LEAPS the next morning. We'll start with a stop loss at $36.40. We will tentatively set our exit target at $50.00 for now.

Breakout trigger: Wait for a close above $40.25
then buy calls the next day with a stop at $36.40

BUY the 2015 Jan $45 call (AAL150117C45) current ask $2.45

- or -

BUY the 2016 Jan $45 call (AAL160115C45) current ask $5.30

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Chart of AAL:

Originally listed on the Watch List: 05/18/14


Packaging Corp of America - PKG

Company Info

PKG is in the consumer goods sector. The company makes containerboard and corrugated packaging materials in the U.S., Canada, Europe, and Mexico. The stock was a big winner last year thanks in large part to PKG's accelerated growth. The company saw 2013 earnings surge to $436 million, up from $164 million in 2012.

PKG just recently acquired Boise and the new merged company is now the fourth-largest containerboard and corrugated packaging maker in the U.S. Management said they expected significant synergies with the acquisition but the results have actually been better than expected.

The last couple of earnings reports from PKG were both bullish with the company beating Wall Street's estimates on the top and bottom line. The latest announcement for the first quarter reaffirmed their full-year 2014 guidance.

Technically the stock has seen a $10 correction (about -13%) with the pullback from $75 to $65. Now shares are starting to rebound from support near $65 and its long-term trend line of higher lows (see weekly chart below). There is potential resistance at the 50-dma and the $70.00 level. Therefore I am suggesting we wait for PKG to close above $70.50 and buy calls the next day. We'll start with a stop loss at $64.75. Our long-term target is the $90 area.

Breakout trigger: Wait for a close above $70.50
buy calls the next day with a stop loss at $64.75.

BUY the 2015 Jan $75 call (PKG150117C75) current ask $1.85

- or -

BUY the 2016 Jan $75 call (PKG160115C75) current ask $4.80

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Chart of PKG:

Originally listed on the Watch List: 05/18/14


V.F. Corp. - VFC

Company Info

VFC is in the consumer goods sector. The company makes apparel and footwear for sale in the U.S. and Europe. Products include handbags, luggage, backpacks, accessories. Major brands include The North Face, Vans, Timberland, Kipling, Jansport, Reef, Smartwool, Eastpak, Wrangler, Lee, just to name a few.

After big gains in 2013 shares of VFC have been consolidating sideways. The company split their stock 4-for-1 back in December 2013. VFC guided lower back in February but the market reaction was a one-day event. Shares have since recovered. Their most recent report was bullish with VFC beating estimates. That's significant since so many apparel makers blamed the weather on a terrible Q1.

There has been growing speculation that VFC might be Lululemon (LULU) or another athletics apparel brand. Normally the acquiring company's stock goes down on a merger announcement but lately Wall Street has been sending the acquirer's stock higher on positive M&A news.

Technically shares look poised to breakout from their five-month consolidation. The Point & Figure chart is already bullish and forecasting an $80 target.

I am suggesting we wait for VFC to close above $64.25 and then buy calls the next day with a stop loss at $59.75. Our long-term target is the $75.00 region.

Breakout trigger: Wait for a close above $64.25
buy calls the next day with a stop loss at $59.75

BUY the 2015 Jan $70 call (VFC150117C70) current ask $1.45

- or -

BUY the 2016 Jan $70 call (VFC160115C70) current ask $4.10

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Chart of VFC:

Originally listed on the Watch List: 05/18/14


Active Watch List Candidates:



Sturm, Ruger & Co. - RGR - close: 65.36

Comments:
05/18/14: RGR's recent attempt at a rally has failed at resistance near $70 and its 100-dma and 150-dma. Tonight we are removing RGR as a watch list candidate. I would keep the stock on your radar screen for a close above $70.00 as a potential bullish entry point.

Trade did not open.

05/18/14 removed from the watch list.
05/11/14 adjust entry point strategy. Wait for RGR to close above $70.25 and use a stop loss at $64.75.

Originally listed on the Watch List: 05/04/14