New Watch List Entries

WAG - Walgreen Co


Active Watch List Candidates

IP - Intl. Paper Co.

NEM - Newmont Mining


Dropped Watch List Entries

None.



New Watch List Candidates:


Walgreen Co - WAG - close: 73.29

Company Info

According to WAG's press release the company describes itself, "As the nation's largest drugstore chain with fiscal 2013 sales of $72 billion, Walgreens (www.walgreens.com) vision is to be the first choice in health and daily living for everyone in America, and beyond.

Each day, in communities across America, more than 8 million customers interact with Walgreens using the most convenient, multichannel access to consumer goods and services and trusted, cost-effective pharmacy, health and wellness services and advice. Walgreens scope of pharmacy services includes retail, specialty, infusion, medical facility and mail service, along with online and mobile services. These services improve health outcomes and lower costs for payers including employers, managed care organizations, health systems, pharmacy benefit managers and the public sector.

The company operates 8,215 drugstores in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Walgreens digital business includes Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com. Take Care Health Systems is a Walgreens subsidiary that manages more than 400 in-store convenient care clinics throughout the country."

While most of the retail industry seems to be struggling with slowing consumer sales this year, it's a different story for WAG. The company just reported a great month in June. Revenues surged +8.9% to $6.3 billion. That's up from $5.8 billion in June 2013. Granted WAG does have a few more stores today (about 117 more stores) the real key was same-store sales. WAG calls them comparable store sales and June's were +7.5%. That is impressive.

WAG is also building its Balance Rewards Program, which ended the last quarter with 81 million members. The company hopes to develop a strong, consistent customer base that continues to visit their locations on a regular basis.

Lately WAG has been in the news regarding its Alliance Boots merger. WAG spent $6.5 billion back in 2012 to buy a 45% stake in Alliance Boots, which is an international drug wholesaler and retailer. WAG has an option in 2015 to buy the rest of the company for $9.5 billion. If they acquire 100% of Boots then WAG could choose to do an "inversion", which is a hot topic right now.

There is a lot of confusion about just how an inversion works. Essentially WAG could move its corporate headquarters out of the U.S. and by doing so lower its tax bill. Barclays estimated that WAG could save $783 million in the first year of an inversion. Another analysts estimated WAG could save $4 billion in the first five years after an inversion. WAG is getting a lot of pressure to not do it. At the same time WAG's board has a responsibility to its shareholders and an inversion is currently legal.

Whether WAG does an inversion or not the company seems to be running on all cylinders. The stock is in a long-term up trend and appears to be finishing a four-week consolidation.

Tonight I'm suggesting we wait for WAG to close above $74.00 a share and then buy calls the next morning with a stop loss at $69.40. Our long-term target is the $90-100 zone. Currently the Point & Figure chart is bullish with a $103 target.

Breakout trigger: Wait for a close above $74.00
then buy calls the next morning with a stop at $69.40

BUY the 2015 Jan $80 call (WAG150117C80) current ask $2.99

- or -

BUY the 2016 Jan $80 call (WAG160115C80) current ask $6.55

Option Format: symbol-year-month-day-call-strike

Chart of WAG:

Weekly Chart of WAG:

Originally listed on the Watch List: 07/27/14


Active Watch List Candidates:



International Paper Co. - IP - close: 49.92

Comments:
07/27/14: Wow! It was a very volatile week for IP. Early in the week shares were down after one firm downgraded the paper and containerboard companies due to concerns over long-term demand. Shares of IP had plunged to technical support at its 200-dma. Then two days later the stock was soaring to new highs on new opinion of +50% to +100% upside. Bloomberg reported that one fund had increased their stake in the containerboard companies with the idea that companies like IP could fuel upside by turning their paper mills in master limited partnerships (MLPs).

The volatile felt a bit extreme. I am adjusting our entry point strategy. We want to see IP close above $52.00 before initiating positions.

FYI: IP is scheduled to report earnings on July 29th.

Earlier Comments: July 13, 2014:
IP has come a long way from its 2009 bottom at $4.00 a share. Today the stock is sitting on $50.00 and looks poised to hit new multi-year highs.

IP is not the same company they used to be. They have sold off their forestry, wood products, and chemical business. Earlier this month they just completed a spinoff of its distribution solutions business, xpedx. Now IP is focused on its core business of making paper and packaging.

IP is also focused on shareholder value. The stock currently sports a 2.9% dividend yield. Management recently announced they have doubled their stock buyback program to $1.5 billion. The company spent $461 million last year on stock buybacks.

Technically shares of IP have been consolidating sideways for months. It looks like the consolidation is about over. The early July high was $51.00. I am suggesting we wait for IP to close above $51.00 and buy calls the next morning with a stop loss at $47.40. Our long-term target is the $60.00 level.

Breakout trigger: Wait for a close above $52.00
then buy calls the next morning with a stop at $47.40.

BUY the 2015 Jan $50 call (IP150117c50)

- or -

BUY the 2016 Jan $55 call (IP160115c55)

07/27/14 adjust trigger to a close above $52.00 (instead of above 51.00)
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 07/13/14


Newmont Mining Corp. - NEM - close: 25.15

Comments:
07/27/14: This could be a volatile week for share of NEM. The company is scheduled to report earnings on July 29th.

Currently our plan is to buy calls if NEM can close above $26.75. I am setting a limitation on that entry requirement. I would not launch positions if we see NEM close above $28.00. Essentially I want to avoid buying a big spike higher.

Earlier Comments: July 13, 2014:
According to the company website, Newmont Mining Corporation is primarily a gold producer, with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, New Zealand and Mexico. Founded in 1921 and publicly traded since 1925, Newmont is one of the world's largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500. Headquartered near Denver, Colorado, the company has around 32,000 employees and contractors worldwide.

NEM also produces copper and silver but they are the second biggest gold producer on the planet by production. The biggest gold producer is Barrick Gold Corp. (ABX) and NEM almost merged with ABX in April this year but discussions fell apart. NEM investors either want the company to resume talks with ABX or break itself up to unlock shareholder value. That seems unlikely but JPMorgan believes the deal talks with ABX may not be dead.

I like NEM more for the technical set up on the charts. It's true that gold has been in rally mode, currently up six weeks in a row and up +10% for the year. Yet the gold miners have been outperforming and the GDX gold miner index is up +29% this year. NEM is only up +12.5% this year but it could play catch up if shares break out from its base.

The stock has been building a base in the $21-26 zone for months. I am suggesting we wait for NEM to close above $26.75 and then buy calls the next morning with a stop loss at $23.75. I would consider this a more aggressive, higher-risk trade because gold and the gold miners can be a volatile group. You may want to limit your position size to reduce your risk.

Breakout trigger: Wait for a close above $26.75
then buy calls the next morning with a stop at $23.75.

BUY the 2015 Jan $30 call (NEM150117c30)

- or -

BUY the 2016 Jan $30 call (NEM160115c30)

Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 07/13/14