NEW DIRECTIONAL CALL PLAYS

Martin Marietta Materials - MLM - close: 134.91 change: +0.84

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
96 percent of all paved roads in the United States are covered in asphalt. The material is a combination of asphalt oil, sand, and gravel. A lot of those materials come from MLM. The company also supplies stone, sand, gravel and concrete. They have over 300 quarries and distribution centers. They plan on growing as MLM is currently in the process of acquiring Texas Industries (symbol: TXI), which will immediately give MLM a strong presence n California and boost its cement business.

The U.S. economy has been struggling to maintain a +2% growth rate but the outlook seems to be improving. As the U.S. grows it's going to see improvement in the residential and non-residential construction. MLM expects sales to the residential market to grow at more than 10% in 2014.

MLM management has noted that historically low mortgage rates and slowly improving employment trends has been a boost for the residential construction market. Annual housing starts are expected to come in at more than one million homes for the first time since 2007.

Meanwhile non-residential is expected to grow in the high-single digits this year. The sector is seeing stronger fundamentals thanks to rising rents and occupancy rates. Rising property values has helped boost commercial real estate lending and that fuels construction.

MLM is also a major player in materials for roads and highways. Government contracts for highway construction and repair were up +14% for the year through last December. This year both the democrats and the republicans have voiced support for a new highway bill, which could mean more business for MLM.

Margins are improving. MLM said their prior quarter saw margins on its aggregates business improve 400 basis points. MLM plans to raise prices by 3% to 5% this year while production costs are expected to decline. That should further boost MLM's margins.

Investors should be aware that the U.S. Department of Justice is looking into MLM's acquisition of TXI but management does not expect any issues. They're suggesting it's just a review but if the DOJ were to block the deal it could rattle the stock.

Technically shares of MLM have been showing relative strength. The stock recently broke out past significant resistance near $130 and closed the week at multi-year highs. If this strength continues MLM could see more short covering. The most recent data listed short interest at 22% of the relatively small 46 million-share float.

Tonight we are suggesting a trigger to buy calls at $135.25.

Trigger @ $135.25

- Suggested Positions -

Buy the Oct $140 call (MLM141018C140) current ask $6.20

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

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 419 thousand
Listed on June 21, 2014


Spirit Airlines - SAVE - close: 63.80 change: +0.73

Stop Loss: 61.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Have you looked at the airline stocks lately? The XAL airline index is hitting levels not seen since early 2002. The strength in the airlines has been a strong undercurrent for the transportation industry. SAVE is doing its part with new all-time highs on Friday.

SAVE is in the low-fare airline category. They currently offer about 250 daily flights to 50 destinations in the United States, Caribbean, and Latin America. While business is good the company has struggled with its reputation. They may be in the ultra-low fare business but they make up for it with lots of add on fees. Last year SAVE had the highest number of complaints per passenger than any other U.S. airline. They're hoping to change that. Last month SAVE launched a new brand overhaul program to better inform their customers about who they are and what to expect.

The company has been doing well in spite of the customer complaints. SAVE is developing a trend of beating Wall Street's earnings estimates. The company recently released its traffic numbers for May and revenue passenger miles were up +18.7% versus May 2013. SAVE's CEO Ben Baldanza echoed this growth in a recent interview where he said his company was on track to grow 18 percent in 2014 and 30 percent in 2015.

Wall Street certainly likes the stock. SAVE got a lot of positive comments and upgrades in April after their most recent earnings report. Analysts are upbeat on SAVE's Q2 and Q3 potential. They are expecting strong earnings and margin growth. SAVE will also grow after they add 24 new planes over the next 18 months.

Jim Cramer had some bullish things to say about SAVE. Cramer credits SAVE's efficiency to boost its ultra-low fare model. According to Cramer, "The company has 55 planes at the moment, but they use those planes more efficiently than the competition, keeping them in the air for 13 hours a day, whereas a Jet Blue only flies its planes for 12 hours a day, and at Southwest that number is less than 11 hours. Also, the company outfits its planes with more seats than the competition, too. On a Spirit Airbus A320 there are 178 seats, versus just 150 seats for Jet Blue on the same model of airplane. True, there's less legroom on a Spirit Airlines flight, however, the revenue potential per flight is greater."

This month the airline stocks did see some turbulence after a major German airline issued a profit warning but the details around the German company do not affect SAVE's business. What could affect SAVE is rising fuel prices. The violence in Iraq has boosted the price of oil and that affects jet fuel prices. Yet so far SAVE and the rest of the airline group have managed to shrug off the high price of oil.

Technically SAVE just closed at a new all-time high and look poised to breakout past resistance near the $64.00 level. We are suggesting a trigger to open bullish positions at $64.75. More conservative investors may want to wait for a rise past $65.00 before initiating positions.

Trigger @ $64.75

- Suggested Positions -

Buy the Sep $65 call (SAVE140920C65) current ask $3.90

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

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 898 thousand
Listed on June 21, 2014