Option Investor

Daily Newsletter, Saturday, 11/25/2017

Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Low Volume Levitation

by Jim Brown

Click here to email Jim Brown

Friday's volume of 2.7 billion shares was extremely low but selling volume was even lower.

Weekly Statistics

Friday Statistics

Volume was even lower than the 3.0 billion shares for Thanksgiving Friday in 2016. Declining volume was only 1.1 billion shares compared to advancing volume of 1.57 billion. Even more telling was the 628 new 52-week highs compared to only 96 new lows. The sellers must have either been at the mall shopping or at home sleeping off the turkey overdose. The bulls were enjoying another day of gains while the bears were left out.

There were no economic reports or earnings on Friday. The only headlines talked about Black Friday sales and shopper volume. For anyone staying home it was a good day just to rest or catch up on those do list items you had been putting off.

The calendar for next week is full of reports and events. There are ten speeches from Fed heads including one from Janet Yellen on Wednesday. The confirmation hearing for Jerome Powell is on Tuesday and that will be televised. The most important reports for the week will be the Richmond Manufacturing Survey and the ISM Manufacturing Index. The ISM is a national report and carried the most weight. All the economic reports are expected to be positive and show continued growth.

The GDP on Wednesday is expected to show a slight upward revision to 3.2% growth.

The volume of earnings continues to decline and should no longer provide support for the market. Jack in the Box, VMWare and Ulta Beauty are the highlights for the week.

After 489 S&P companies have reported earnings, the expected growth for Q3 is 8.3% with revenue growth up 5.4%. 72.2% of companies have beaten the street's earnings estimates and 67.8% have beaten revenue estimates. There have been 63 earnings warnings for Q4 and 37 guidance upgrades. Only six S&P companies report this week.

Broadcom (AVGO) is reportedly considering raising the offer for Qualcomm (QCOM) from $70 to $77 but there may be a poison pill in the offer. Qualcomm would have to cancel its bid for NXP Semiconductor (NXPI). Qualcomm has offered $110 for NXPI and the stock is trading over $114 on expectations for a higher offer from Qualcomm. The company believes it must own NXPI if it is going to remain independent in order to compete in the sector in the future. Some analysts believe QCOM was willing to bump their offer to as much as $120.

This actually gives Qualcomm and escape route from the unwanted clutches of Broadcom. If QCOM raises their bid for NXPI to $120-$125, Broadcom would likely lose interest in Qualcomm. However, this would ratchet up the leverage for Qualcomm and set them up as a target for activist investors.

The downside is that a failure to acquire NXPI for whatever reason makes QCOM an even bigger target for Broadcom. The acquirer could make the case that QCOM was incapable of competing in a sector that is rapidly increasing in complexity and competition.

Broadcom (AVGO) shares are rising after they announced a 7 nanometer (NM) application specific integrated circuit (ASIC) for deep learning and networking. The core is built on the Taiwan Semiconductor Manufacturing (TSM) 7nm process technology. This technology on this small of a chip was technically unheard of just a couple years ago. This IP technology makes it perfect for advancing the 5G communications standards for systems on a chip (SoC) in the years ahead. Broadcom is a leader and major competitor in wireless solutions.

Teva (TEVA) shares posted a gain on news they were going to cut their workforce by about 4,000 workers. Reportedly, they will lay off 20% to 25% of their workforce in Israel and 10% in the USA. A financial website in Israel (Calcalist) reported the news. Teva is facing significant generic competition and falling prices for generic drugs. They missed on Q3 earnings and cut full year guidance from $4.30-$4.50 to $3.77-$3.87. Operating cash flow guidance fell from $4.4-$4.5 billion to $3.15-$3.30 billion. Shares spiked at the open but fell back to close with only a fractional gain. The company never confirmed the story.

When President Trump visited Saudi Arabia in May, he came home with $110 billion in defense orders. Part of that deal was $7 billion in precision munitions that would be provided by Boeing (BA) and Raytheon (RTN). There are concerns now that the munitions orders could be held up by congressional concerns about the number of civilians being killed in Yemen by the Saudi bombing. Reportedly, between 5,000 and 10,000 civilians have been killed and 40,000 injured. The Houthi rebels are experts at locating their command and control and weapons storage in heavily populated areas thinking Saudi Arabia will not bomb them there.

The order contains more than 8,000 laser guided bombs, 10,000 general purpose bombs and more than 5,000 GPS guidance kits for dumb bombs. The $110 billion in orders for 2018 is just part of what could be $350 billion over the next ten years. With Saudi Arabia becoming more overtly hostile towards Iran, it would be better to sell them the weapons and let them keep Iran in check rather than risk US lives and assets in policing Iran.

Lockheed Martin (LMT) said Saudi Arabia was negotiating to buy $28 billion in "integrated air and missile defense, combat ships, tactical aircraft and rotary wing technologies and programs." Boeing has other orders from the president's trip that include Chinook Helicopters and P-8 reconnaissance planes.

Defense stocks seem to be a bulletproof sector for the coming years.

Jeff Bezos net worth hit $100 billion on Friday as Amazon (AMZN) shares surged $30 to close at $1,186 and a new high. He is now the richest person in the world and the first person in modern times to hit $100 billion. He owns 78.9 million shares of Amazon. His Amazon shares are worth about $93.6 billion, up $2.4 billion on Friday. He has a $3 billion stake in Blue Origin, the rocket company competing with Elon Musk and Space X. He also owns the Washington post.

David Rockefeller was worth several hundred billion in today's dollars but nowhere near $100 billion when he was alive. Russia's Vladimir Putin is believed to be worth more than $100 billion but all his wealth comes from secret side deals with companies that he allows to do business in Russia so there is no way to know his actual wealth.

Amazon is going to host the 6th annual re:Invent cloud conference next week from Monday through Friday. There could be numerous announcements of new products and partnerships that will lift the stock.

Tesla (TSLA) announced the prices on its new trucks. The starting price for a Tesla Semi with a 300-mile range will be $150,000 and the 500-mile range vehicle will cost $180,000. The order demand has been strong and Tesla bumped the deposit from $5,000 each to $20,000 each. Other than the dog and pony show held by Elon Musk last week there has not been a list of features in the standard package and what options are available at extra cost. Tesla has said the trucks will be able to deliver an 80,000-pound payload but nobody knows how much the actual truck will weigh. That would add to the total weight and is relative for highway use tolls based on weight.

Morgan Stanley (MS) predicted the stock could rise to $400 in 2018 and then drop back to $200 because of a failure to ramp up production and increasing competition. GM has more than 20 electric vehicle models that will be in production in the coming years. Several other carmakers including BMW and Mercedes are rushing electric cars into production. Every mass-market car that hits the streets will weigh on Tesla prices in the future.

Barclays upgraded GM shares from neutral to buy saying the company was going to reinvent itself with electrification and autonomy. One analyst said the new GM could include a spinoff of their electric car division that could easily grow to $60 billion in market cap by 2025. That would be double GM's market cap today. They raised the price target from $41 to $55. Shares closed at $44.

Apple shares have shaken off the post earnings depression phase after a minor $8 drop and just short of the typical $10 decline. Shares have rebounded $6 from the $168 low the prior Wednesday when the major indexes closed at multi week lows. You can chalk it up to holiday shopping frenzy and the Thanksgiving week trend for investors to buy big cap tech stocks.

China's Economic Daily News said the company is preparing to launch a new lower-priced iPhone SE 2 that will cost about $450 and be aimed at emerging markets where consumers cannot afford the $1,000 premium phones. The current SE has a 4 inch screen and starts at $349. Analysts expect the phone to have a faster processor in order to run iOS 11.

The Wall Street Journal said stock buybacks are occurring at the slowest pace in five years. Year to date, S&P 500 companies have bought back about $125 billion in stock per quarter or targeting roughly $500 billion through December if the pace holds. The quarterly average between 2014-2016 was $142 billion a quarter. Authorizations increased by 20% in Q3 suggesting there are more buybacks ahead but there is a problem with that theory. With the broader market up 19% YTD and the indexes making new highs, stocks are expensive. Companies, like smart investors, are going to wait for a pullback so they can buy their stock cheaper and get more bang for their bucks. Goldman Sachs is forecasting a 3% increase in buybacks in 2018 to $515 billion.

Secondly, many companies have been paying off debt incurred after the financial crisis and with stock prices so high, they are prioritizing debt payments to increase future profitability. Many companies were borrowing money to finance buybacks and that practice has declined for the third consecutive quarter according to Bank of America. The pace of mergers and acquisitions is rapidly accelerating. The bank said M&A just had its busiest quarter of the year.

If tax reform passes with a 20% corporate rate and a minimal repatriation tax, we could see a surge in buybacks and dividends once the new rules become effective. There are estimates between $1 and $3 trillion in cash overseas that could be transferred to the US with a favorable tax treatment.

For investors this means future market declines should be short and shallow. Companies buying back their own stock on the dips will provide a floor under those securities. Obviously, not all companies buy back stock and the companies with billions in authorizations are the larger blue chip companies.

Consumers went shopping for bitcoin on Thursday as well. The largest bitcoin exchange in the US, Coinbase, added about 100,000 accounts from Wednesday to Friday to bring their account total to 13.1 million. One year ago, the exchange had only 4.9 million users. Bitcoin was worth $735 each last November. The CME is going to start offering bitcoin futures the second week of December. The move by the CME has given a sort of legitimacy to the cryptocurrency and consumers and investors are racing to get a piece of the pie. Analysts now expect bitcoin to be worth more than $10,000 by the end of the year. As of Saturday, the current price was $8,731.

Adobe Systems (ADBE) said Black Friday sales were surging. Online spending rose by 18.4% while mobile purchases rose by 46.2%. Online spending on Thanksgiving was up 18.3%. Shoppers surveyed indicated that 64% still planned on doing some holiday shopping in stores while 36% planned to do all their shopping online. More than 70 million consumers plan on using Cyber Monday sales to pick up some bargains. Overall consumers are expected to spend about $680 billion in November and December this year. That accounts for 17% of annual consumer spending.

Crude prices spiked again to close just under $59. Reportedly, there were comments from OPEC officials that Russia was going to agree to extend the production cuts. Others said Russia was going to agree only with certain conditions. The country is aggravated that the high prices are fueling US shale producers and the new flood of exports is cutting into Russia's export market share.

The growing hostility between Saudi Arabia and Iran was also credited with some of the price support. Personally, I doubt Saudi Arabia will enter into direct conflict with Iran for several years because of their billions of dollars in orders for military equipment. I believe they would want to have all those supplies and equipment on hand before starting a war.

Lastly, the Keystone pipeline is still offline while they repair the leak. That means inventories are going to decline next week and that supports prices.

The November OPEC production meeting is on Thursday. There will undoubtedly be a lot of propaganda from the participants as they flock to microphones like moths to a flame.

The active rig count rose by 8 with 9 oil rigs added and 1 gas rig removed. Producers have now reactivated 25 rigs over the last three weeks. Higher oil prices are providing the stimulation.


With only 2.7 billion shares traded and more than 60% of that likely done by computers, the market activity was about as exciting as watching a recent Denver Bronco football game. The Dow and S&P gapped open and then rose slightly intraday to peak around 11:AM and then faded into the close. The Nasdaq rose all day as investors bought the big cap tech stocks.

The market appears sluggish but nobody should have expected any material gains on Friday. This was more a lack of sellers than a surge of buying.

The balance of investor sentiment swung back slightly in favor of the bulls but given the new market highs last week you would have thought it would have been a bigger swing. With 64.5% still not convinced the market is moving higher, there is room for a lot more capitulation to the bullish camp.

The 2,600 resistance level on the S&P could still exert its influence next week. The 2-point gain over that level is not enough to escape its pull. Thanksgiving week is typically bullish and the gains were right on par with what was expected historically.

I went back on the charts to try and decide if there were any post Thanksgiving trends that we should watch. In recent years there was a sell off but not routine enough to be predictive for 2017.

S&P gains/losses in the week after Thanksgiving:

2016 -26 points
2015 flat
2014 -25 points
2013 -29 points
2012 flat
2011 +105 points
2010 flat

Obviously, those moves were related to events and market action leading up to Thanksgiving but that is more analysis than I am prepared to do here and past results are no guarantee of future performance. This simple exercise was to try and project a pattern.

The only one of significance is that there was only one gain in the last 7 years. If I was going to focus on one thing that would be it.

The Dow had one good day last week and then failed at resistance the last three days. The index is still struggling because of post earnings depression in many of its components. It is not serious but it is weighing on the index.

Round number resistance at 23,600 has held for three days. The Dow remains the most at risk index because of the big air pocket down to 22,275.

The Nasdaq 100 gained 23 points and AMZN, FB and AVGO supplied 20 of those points. This was a narrow rally at first but broadened out to 3:2 advancers to decliners on Friday.

The Nasdaq Composite is approaching 6,900 and the 7,000 level is being mentioned as a target and potential top in December. Reaching that level would represent a monster 30% gain for the year. Trees do not grow to the sky and markets do not rally forever.

The Russell succeeded in punching through the new high resistance from October and stalled at 1,520. That is where it has closed for the last three days. The monster four day rebound erased six weeks of declines. Can it continue? It would appear the Russell is due for a rest but anything is possible.

I believe investors should be cautious next week. With lawmakers going back to work, the tax reform package will take center stage and currently there are six GOP senators on the fence and considering voting no. With the extreme pressure that will be brought to bear over the next two weeks, I would expect some positive conversions but at least four have to switch to yes votes and this is just to get the bill into the conference committee. Once out of committee it will be even more difficult to get it passed again by both the House and the Senate. Time is growing short to get this done by Christmas as the administration has promised. That means there will be some deals cut that could appease some and displease others. A failure in the senate could mean a significant market decline.

Enter passively and exit aggressively!

Jim Brown

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New Plays

Acquisition Binge

by Jim Brown

Click here to email Jim Brown
Editor's Note

Extreme Networks just keeps acquiring businesses and customers at a discount. The company has been fortunate to pickup three different sets of businesses to round out their product offerings.


EXTR - Extreme Networks - Company Profile

Extreme Networks, Inc. provides software-driven networking solutions for enterprise customers worldwide. The company designs, develops, and manufactures wired and wireless network infrastructure equipment; and develops the software for network management, policy, analytics, security, and access controls. It offers edge/access Ethernet switching systems that delivers Ethernet connectivity for edge of the network; aggregation/core Ethernet switching systems for aggregation, top-of-rack, and campus core environments; data center switching systems for enterprises and cloud data centers; and wireless access point products, as well as distributed Wi-Fi networks. The company also provides ExtremeControl, a network access control solution that allows the enterprises to unify the security of their wired and wireless networks with visibility and control over users, devices, and applications; and ExtremeAnalytics, a network-powered application analytics and optimization solution, which captures, aggregates, analyzes, correlates, and reports network data that enables in decision making and enhancing business performance. In addition, it offers ExtremeCloud, a wired and wireless cloud network management solution, which offers advanced visibility and control over users and applications. The company sells and markets its products through distributors, resellers, and field sales organizations. It serves enterprises and organizations in education, healthcare, manufacturing, hospitality, transportation, and logistics, as well as government agencies. Company description from FinViz.com.

Over the last year Extreme bought the networking assets of Avaya after they went bankrupt. They also bought the networking assets from Brocade, a company that is being acquired by Broadcom. They also acquired the wireless networking unit from Zebra Technologies (ZBRA) in a restructuring move. Each of these assets they acquired for less than half annual sales. This is a bargain in the tech world. They also acquired the customers from these acquisitions and have begun cross selling to them from their other product lines. Extreme is no longer a bit player in the networking sector but has grouped together end to end solutions.

In the last quarter, they grew revenue by 73%. Earnings rose from 7 cents to 16 cents and beat estimates for 14 cents. They are targeting margins of 60% in future quarters. Revenue was $211.7 million and they guided for $236-$246 million in the current quarter.

Expected earnings Feb 6th.

The key to Extreme's progress is software networking. The industry is moving from hard coded command line interface routers and switches to Windows like interfaces that can be operated by lower skilled operators rather than high dollar network technicians proficient in Cisco router code.

Shares have rallied sharply over the last two weeks but I believe they have farther to go because the recent earnings surprised investors.

Buy EXTR shares, currently $13.71, initial stop loss $12.25.
Alternate position: Buy Mar $15 call, currently $1.10, no initial stop loss.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps more than $1.00 at the market open.


No New Bearish Plays

In Play Updates and Reviews

We Have a Winner

by Jim Brown

Click here to email Jim Brown

Editors Note:

Thanksgiving week turned out to be another winner and the trend is intact. Historically, Thanksgiving week is normally bullish and the indexes posted some decent gains for the week. The Nasdaq and S&P closed at new highs but the Dow is still struggling. Despite the struggle the Dow gained 200 points for the week. The Russell 2000 and the Dow are both holding at Tuesday's highs but not making any further progress.

Current Portfolio

Stop Loss Updates

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Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.

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BULLISH Play Updates

AMD - Advanced Micro Devices - Company Profile


No specific news. Very minor 1 cent gain.

Original Trade Description: November 4th

Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. Its primarily offers x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and professional graphics; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles. The company provides x86 microprocessors for desktop PCs under the AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU, AMD Sempron APU and CPU, and AMD Pro A-Series APU brands; and microprocessors for notebook and 2-in-1s under the AMD A-Series, AMD E-Series, AMD C-Series, AMD Z-Series, AMD FX APU, AMD Phenom, AMD Athlon CPU and APU, AMD Turion, and AMD Sempron APU and CPU brand names. It also offers chipsets with and without integrated graphics features for desktop, notebook PCs, and servers, as well as controller hub-based chipsets for its APUs under the AMD brand; and AMD PRO mobile and desktop PC solutions. In addition, the company provides discrete GPUs for desktop and notebook PCs under the AMD Radeon brand; professional graphics products under the AMD FirePro brand name; and customer-specific solutions based on AMD's CPU, GPU, and multi-media technologies. Further, it offers microprocessors for server platforms under the AMD Opteron; embedded processor solutions for interactive digital signage, casino gaming, and medical imaging under the AMD Opteron, AMD Athlon, AMD Sempron, AMD Geode, AMD R-Series, and G-Series brand names; and semi-custom SoC products that power the Sony Playstation 4, Microsoft Xbox One, and Xbox One S game consoles. Company description from FinViz.com.

Expected earnings Jan 23rd.

Nvidia (NVDA) shares were rocked again last week after news broke that Tesla was looking at options other than Nvidia for the chips to power the autonomous driving functions. The initial headline saw AMD spike and Nvidia decline. The actual story is that AMD and Nvidia are partnering on creating a chip solution for Tesla. It is no surprise that AMD is in the mix because Tesla hired Jim Keller to lead development of Autopilot. Keller previously worked at AMD and led the development of the Zen architecture and the new Ryzen processors.

AMD announced a new embedded GPU requiring less power and capable of driving five simultaneous 4K displays. The GPU requires less than 40 watts TDP and comes in a smaller, thinner package. The chip has a 1.25 TFLOPS speed and comes in three form factors including MCM, MXM and PCI Express. The 4K and 3D support works for games, medical imaging, advertising signage and industrial uses. The GPU has 4 GB of GDDR5 memory.

AMD reported earnings of 10 cents compared to analyst estimates for 8 cents. Revenue of $1.64 billion rose 25.7% and beat estimates for $1.51 billion. Shares collapsed in afterhours after the company guided for a 12% to 18% decline in Q4 revenue to around $1.34-$1.44 billion and analysts were expecting $1.34 billion. Based on analyst expectations that lower guidance was not that bad but it is the principle of lower guidance that sends investors running for the exits.

The new CEO for AMD, Lisa Su, said in an interview last week that with 10 major product launches this year, AMD has completely restructured its product portfolio. "This shift is perhaps one of the most ambitious product ramps that has been done, certainly in AMD's lifetime."

The new Ryzen Mobile combines the best points of the Zen processor and the best of the Vega product and the most recent graphics architecture into a single product. No other company has been able to combine premium processor cores from both categories and merge them into a single chip that runs in an ultra-thin notebook.

HPQ, Lenovo and Acer have announced products that will ship this quarter in time for holiday shopping. AMD products have found new popularity in the key retailer market. Su said they had captured 50% of sales at Amazon and Newegg, the two biggest online computer marketplaces. Processor revenue rose 74% in the latest quarter. Their new AI product, MI25, is already shipping in quantity to data centers around the world and acceptance was accelerating.

I think analysts were wrong on the Q3 earnings. I believe AMD is right on the edge of a resurgence that will make the company a real competitor again.

I am using the April options to get us past their January earnings. When we exit before the event the options will still have an expectation premium.

Update 11/6/17: AMD and Intel could have waited one more day before announcing a partnership to combine AMD's graphics chip with an Intel processor and High Bandwidth Memory to create a thinner and lighter chip for laptops with top tier visual performance. This was rumored several weeks ago but Intel denied it at the time. On Oct 10th, I wrote this.

AMD shares rallied after a processor conference and upgrade to Nvidia. Yesterday there was an article with a picture of a new Intel processor with "Vega Inside" but it has disappeared today. Intel has previously denied any licensing with AMD but the picture showed a mobile processor with Intel Outside, Vega Inside, which would mean AMD's Vega graphics on an Intel chip. This was for a mobile processor for a notebook or tablet. Apparently, Intel was not ready for the world to see that internal graphic and the article was removed from circulation. If/when Intel does announce a deal with AMD the stock is going to soar.

Update: I was able to go back and find the link I had saved even though it was no longer referenced on the website. Vega Inside

Update 11/8/17: AMD's head of the graphics chip unit, Raja Kordui, announced his resignation. This creates big sentiment problems for AMD. He said he was leaving to spend more time with his family but why would a highly successful department head exit right on the eve of a major product expansion? Of course AMD said this would not impact their direction and future goals but Kordui was credited with making AMD GPUs competitive with Nvidia and kept Nvidia from dominating the space. CEO Lisa Su will assume Kordui's role until a replacement is named. She is by far the most intelligent and dynamic CEO the company has ever had and she is more than capable of occupying both positions.

Position 11/6/17:

Long AMD shares @ $12.04, see portfolio graphic for stop loss.
Alternate position: Long April $12 call @ $1.50, see portfolio graphic for stop loss.

BOTZ - Global X Robotics AI - Company Profile


Since this is a long-term slow moving ETF position, there will not be daily commentary.

Original Trade Description: October 4th.

The investment seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index. The fund invests at least 80% of its total assets in the securities of the underlying index. The underlying index is designed to provide exposure to exchange-listed companies in developed markets that are involved in the development of robotics and/or artificial intelligence as defined by Indxx, the provider of the underlying index. The fund is non-diversified. Company description from FinViz.com.

Robots of every description are taking over the manufacturing sector, service sector, etc. Drones are automated. Autos are becoming autonomous.

Even more important to this ETF is the sudden arrival of Artificial Intelligence or AI. That is the buzzword for everything. Everybody is trying to get into the AI business.

This ETF took off last January and while there have been several mild hiccups along the way, the chart is nearly vertical as investors become aware of it.

I am going to lag back on the stop loss because this could be a long-term position.

Update 10/26: Shares of BOTZ fell 50 cents for the biggest one-day drop since the ETF began in September 2016. There was no news but volume of 4.16 million shares was the largest ever and well over the 964,000 historical average.

Position 10/5/17:

Long BOTZ shares @ $22.10, see portfolio graphic for stop loss.
Alternate position: Long Mar $23 call @ 80 cents, see portfolio graphic for stop loss.

DLTH - Duluth Holdings - Company Profile


No specific news.

Original Trade Description: November 20th

Duluth Holdings Inc. markets clothing, tools, and accessories under the Duluth Trading brand via Website and catalogs for contractors and serious do-it-yourselfers in the United States. It offers shirts, pants, casual wear, workwear, underwear, outerwear, footwear, accessories, and hard goods for men and women. The company markets its products under the various trademarks, trade names, and service marks, including Alaskan Hardgear, Armachillo, Ballroom, Bucket Master, Buck Naked, Cab Commander, Crouch Gusset, Dry on the Fly, Duluth Trading Company, Duluthflex, Fire Hose, Longtail T, No Polo Shirt, and Wild Boar Mocs. It also operates six retail stores and an outlet store across Minnesota, Iowa, and southern Wisconsin. The company was formerly known as GEMPLER'S, Inc. and changed its name to Duluth Holdings Inc. Duluth Holdings Inc. was founded in 1989 and is headquartered in Belleville, Wisconsin. Company description from FinViz.com.

Duluth reported Q2 earnings of 13 cents and beat estimates for 10 cents. Revenue of $86.2 million also beat estimates for $82.8 million. The company guided for the full year for earnings of 66-71 cents and revenue in the range of $455-$465 million.

Shares traded sideways to slightly higher for the last two months. On November 1st, BMO Capital downgraded the company from outperform to market perform and lowered their price target to $20. The analyst said they were seeing increased fall promotions and early season specials by brands they considered to be peers to Duluth.

Whether this will impact Duluth or not is unknown until they report earnings on Dec 7th. Shares have ticked up over the last three days as investors buy retailers ahead of the holiday season.

I also see Duluth as an acquisition target but that is not likely over the next three weeks.

This is going to be a short play. We are going to exit before the Dec 7th earnings. I am looking for a continued rise to $20 over the next three weeks.

Position 11/21/17:

Long DLTH shares @ $18.26, see portfolio graphic for stop loss.
Alternate position: Long Jan $20 call @ $1.10, see portfolio graphic for stop loss.

We could hold the call over earnings depending on stock movement over the next three weeks.

INVA - Innoviva Inc - Company Profile


No specific news.

Original Trade Description: November 15th

Innoviva, Inc. engages in the development and commercialization of bio-pharmaceuticals. Its portfolio of respiratory products include RELVAR/BREO ELLIPTA, (fluticasone furoate/ vilanterol, FF/VI) and ANORO ELLIPTA (umeclidinium bromide/ vilanterol, UMEC/VI). The company, under its the Long-Acting Beta2 Agonist (LABA) collaboration agreement and the strategic alliance agreement with Glaxo Group Limited (GSK), is entitled to receive royalties on the sales of RELVAR/BREO ELLIPTA; and a 15% of any future payments made by GSK under its agreements relating to the combination FF/UMEC/VI and the Bifunctional Muscarinic Antagonist-Beta2 Agonist program, as monotherapy and in combination with other therapeutically active components. It has LABA collaboration agreement with GSK to develop and commercialize once-daily LABA products for the treatment of chronic obstructive pulmonary disease and asthma. The company was formerly known as Theravance, Inc. and changed its name to Innoviva, Inc. in January 2016. Innoviva, Inc. was founded in 1996 and is headquartered in Brisbane, California. Company description from FinViz.com.

Expected earnings January 24th.

Innoviva reported earnings of 21 cents ($23.8 million) compared to estimates for 33 cents. Revenue was $48.6 million. Yes, earnings were nearly 50% of revenue. Adjusted EBITDA rose 39% to $46.0 million. Cash onhand was $168.2 million. They received $51.9 million in royalties from Glaxo Group (GSK).

Shares crashed nearly $3 on the earnings miss despite very positive business comments from the company. Their new drugs now being marketed by Galxo were dowing well. The sales of Relvar/Breo Ellipta rose 40% to $297.4 million. Sales of Anoro Ellipta rose 51% to $111.9 million. They received a positive opinion in September from the EU Medicine Agency for Trelegy Ellipta for COPD. They received approval for the same drug from the FDA. Read further business updates in their release HERE.

Everything looks bright for INVA and their strong relative strength in a weak market suggests they will do well when the market recovers.

Position 11/16/17: Alternate position: Long March $15 call @ 60 cents, see portfolio graphic for stop loss.

ON - ON Semiconductor - Company Profile


No specific news.

Original Trade Description: November 7th

ON Semiconductor Corporation manufactures and sells semiconductor components for various electronic devices worldwide. It operates through three segments: Power Solutions Group, Analog Solutions Group, and Image Sensor Group. The Power Solutions Group segment offers discrete, module, and integrated semiconductor products for various applications, such as power switching, power conversion, signal conditioning, circuit protection, signal amplification, and voltage reference. The Analog Solutions Group segment designs and develops analog, mixed-signal, and logic application specific integrated circuits and standard products, as well as power solutions for a range of end-users in the automotive, consumer, computing, industrial, communications, medical, and aerospace/defense markets. This segment also provides trusted foundry, trusted design, and manufacturing services, as well as integrated passive devices technology. The Image Sensor Group segment offers complementary metal oxide semiconductors and charge-coupled device image sensors, as well as proximity sensors, image signal processors, and actuator drivers for autofocus and image stabilization for a range of customers in automotive, industrial, consumer, wireless, medical, and aerospace/defense markets. The company serves original equipment manufacturers, distributors, and electronic manufacturing service providers. Company description from FinViz.com.

Earnings Feb 6th.

ON continues to power higher on a surge of new products as the IoT boom continues. The company completed the acquisition of Fairchild Semiconductor in September.

A major factor in the boom is the Advanced Driver-Assistance Systems. This market is expected to reach $42 billion by 2021 according to MarketsandMarkets. This is giving ON a tremendous boost in earnings and forecasts.

In October ON and Fujitsu announced an agreement where ON will purchase 40% of Fujitsu's 8-inch wafer fabrication plant in Aizu-Wakamatsu. The purchase will be completed by April 1st. ON already had a 10% share and will acquire another 30%. ON said it planned to increase ownership to 80% in the second half of 2018 and 100% in the first half of 2020. By scaling into the ownership it will allow ON to add capacity as demand increases.

The company reported earnings of 30 cents that missed estimates for 40 cents. Revenue of $1.39 billion beat estimates for $1.37 billion. They guided for the current quarter for revenue of $1.33-$1.38 billion. They missed the estimates but that was a 976% rise in profits and 46% increase in revenue. Shares fell sharply at the open to stop us out but rebounded sharply in the afternoon. I am recommending we reenter this position using only the April option. This is the first available option series after their Feb 6th earnings. We will not hold it until April but being after their earnings the option will retain its premium better for when we do decide to exit. I am also listing the December $20 put because it is cheap and ON has been rising for 2 months. If the rally dies this would be cheap insurance.

Position 11/8:

Long Apr $22 call @ $1.60, see portfolio graphic for stop loss.
Optional position: Long Dec $20 put @ 20 cents, see portfolio graphic for stop loss.

STM - ST Microelectronics - Company Profile


No specific news.

Original Trade Description: November 11th

STMicroelectronics N.V., together with its subsidiaries, designs, develops, manufactures, and markets semiconductor products, and subsystems and modules worldwide. The company offers a range of products, including discrete and standard commodity components, application-specific integrated circuits, full-custom devices and semi-custom devices, and application-specific standard products for analog, digital, and mixed-signal applications, as well as silicon chips and smartcards. It also provides subsystems and modules, including mobile phone accessories, battery chargers, and ISDN power supplies for the telecommunications, automotive, and industrial markets; and in-vehicle equipment for electronic toll payment. The company sells its products through its distributors and retailers, as well as through sales representatives. STMicroelectronics N.V. was founded in 1987 and is headquartered in Geneva, Switzerland. Company description from FinViz.com.

STM reported earnings of 28 cents rose 136% on revenue of $2.14 billion, which rose 19%. Analysts were expecting 24 cents and $2.09 billion. Earnings were boosted by multiple products in the Apple product line. All product groups reported double-digit revenue growth with strong demand across all geographies. The CEO said "we continue to see strong demand in Q4 across all products and all geographies with strong booking activity and the expected acceleration of growth serving wireless applications. Revenue should increase 10% in Q4."

Expected earnings January 25th.

Demand is surging for their new "time of flight" sensors, which Apple is buying as a proximity or motion detector for the iPhones.

Last week STM announced a new, faster wireless charging QI extended power chip for phones and tablets. The chip supports the very latest QI standard for faster charging. By raising the power from 5W to 15W phones can charge three times faster.

I have looked at playing STM a dozen times over the last several months and kept waiting for a pullback that never came. Shares dipped on Thursday with the chip sector but immediately rebounded. I believe the chip sector will remain hot and STM will continue higher. With the earnings beat and strong guidance there should be nothing holding it back.

Position 11/13/17:

Long STM shares @ $23.56, see portfolio graphic for stop loss.
Alternate position: Long April $25 call @ $1.70, see portfolio graphic for stop loss.

April is the only option series that allows us to exit before earnings but still have the expectation in the option price.

SYNT - Syntel - Company Profile


No specific news.

Original Trade Description: November 18th

Syntel, Inc. provides digital transformation, information technology (IT), and knowledge process outsourcing (KPO) services worldwide. The company operates through Banking and Financial Services; Healthcare and Life Sciences; Insurance; Manufacturing; and Retail, Logistics, and Telecom segments. It offers managed services, including software applications development, maintenance, and digital modernization testing, as well as IT infrastructure, cloud, and migration services. The company also provides a range of consulting and implementation services built around enterprise architecture; data warehousing and business intelligence; enterprise application integration; and SMAC technologies, including social media, Web and mobile applications, big data, analytics, and Internet of things. In addition, it offers KPO services that provide outsourced solutions for knowledge and business processes; and business intelligence, enterprise resource planning, and business and technology consulting services. The company offers its products to various companies in the banking and financial services, healthcare and life sciences, insurance, manufacturing, retail, logistics and telecom, and other industries. Syntel, Inc. was founded in 1980 and is headquartered in Troy, Michigan. Company description from FinViz.com.

Syntel reported earnings of 51 cents that beat estimates for 41 cents. Revenue of $231.3 million also beat estimates for $218.2 million. For the full year they guided for earnings of $1.81-$1.88 and revenue of $890-$902 million. They ended the quarter with $109 million in cash.

Business is good and a highly qualified labor force has allowed them to reduce their employee coult from 23,055 last year to 21,928 at the end of Q3. The CEO said the demand for digital services was robust and the insurance segment continued to post healthy growth.

Shares spiked from $19 to $25 on the earnings in mid October. After a month of post earnings depression the uptrend has returned with the stock back at $25.

Because the stock is a few pennies over $25 the next available option strike is the $30 level. There is no open interest in Dec/Feb series. I am going to reach out to May where there is open interest of 415 contracts and there is actually a bid and ask quote. We do not have to hold the position until May but should we get lucky and Syntal makes a breakout, the long dated options will inflate relatively quickly.

Position 11/20/17:

Long SYNT shares @ $25.00, see portfolio graphic for stop loss.
Alternate position: Long May $30 call @ $1.05, see portfolio graphic for stop loss.

BEARISH Play Updates

VXX - Volatility Index Futures - ETF Description


Since this is a long-term slow moving ETF position, there will not be daily commentary.

Original Trade Description: September 18th.

The VXX is a short-term volatility ETF based on the VIX futures. As a futures product it has the rollover curse. Every time they roll to a new futures contract, they have to pay a premium and that lowers the price of the ETF. It is a flawed product with a perpetual decline built in from the monthly roll over in the futures contracts.

As evidence of this flaw, they have now done four 1:4 reverse stock splits. The last five reverse splits occurred at $13.11 (11/2010), $8.77 (10/2012), $12.84 (11/2013), $9.52 (8/8/16), $12.77 (8/22/17). The prospectus says it can reverse split anytime it trades under $25 for a prolonged period and the splits will always be 1:4.

We know from experience that the VXX always declines. The last two times we shorted this ETF we had a $7.23 and $5.98 gain.

Unfortunately, put options are expensive with a volatility instrument at this price level. The only recommendation is to short the ETF and forget it. If we do get a prolonged rally into year-end we could see a sharp decline in the VXX over the next 2-3 months. This will be a long-term position. This is not a 2-3 week play. I can guarantee you, if history holds, we can play this until it splits 1:4 again at $10. Once we are in the position and profitable I will put a trailing stop loss on it. We will take profits and then look for a bounce to get back in.

The VXX is hard to short. Shortsqueeze.com says there are 19.9 million shares short out of 26.7 million shares outstanding. The shares are out there and being traded because the volume on Monday was 29.6 million. You have to tell your broker you really want to short it and make them find the shares. Sometimes it takes days or even a week before your broker will find you the shares. Trust me, be persistent and it will be worth the effort.

I had held off after the 1:4 reverse split because the options were expensive and I was expecting volatility in September from the budget battle and debt ceiling hurdle. With those issues pushed out into December, the volatility is dropping like the proverbial rock. Several readers have already emailed me asking when I was going to put this position back in the portfolio.

Position 9/19/17:

Short VXX shares @ $40.95, see portfolio graphic for stop loss.

Left Over Lottery Tickets

These positions were left over from prior plays where we had an optional option with no stop after the stock position was closed. Rather than close these for a few cents they are left open as a "Lottery Ticket" play. With months before expiration, anything is possible. A strong move in a single stock can be well worth the additional patience.

These positions are only updated on the weekend.

ETSY - Etsy Inc - Company Profile


No specific news. Etsy did join the Small Business Saturday movement.

Original Trade Description: Sept 13th.

Etsy, Inc. operates as a commerce platform to make, sell, and buy goods online and offline worldwide. Its platform includes its markets, services, and technology, which enables to engage a community of sellers and buyers. The company offers approximately 45 million items across approximately 50 retail categories to buyers. It also provides various seller services, including direct checkouts, promoted listings, and shipping labels, as well as Pattern by Etsy to create custom Websites; and seller tool and education resources to start, manage, and scale businesses to entrepreneurs primarily through Etsy.com. In addition, the company operates A Little Market, a handmade and supplies market for sellers and buyers. Company description from FinViz.com.

For Q2, the company reported earnings of 10 cents that rose from a 6-cent loss in the year ago quarter. Revenue rose 19.1% to $101.7 million. Active sellers rose 10.9% to 1.83 million. Gross merchandise volume rose 11.7% to $748 million. Sales on mobile devices rose 47%. International sales rose 31% to 32% of gross sales. The number of employees in the workforce declined 23% thanks to an aggressive push by the CEO to expand profitability.

They guided for gross merchandise sales to rise 12% to 14% for the full year, up from prior guidance of 11.7%. Full year revenue is expected to rise 18% to 20% and in line with the 19.1% in Q2.

The company is growing rapidly, especially internationally and they are reducing costs significantly. Over the last several months, they replaced the CEO, CFO and CTO in their push to grow the company and profits quickly.

Expected earnings Nov 6th.

On Sept 7th a Davidson's analyst, Tim Forte, went all in on ETSY with a glowing forecast. Shares spiked to $17.50 and then faded for a couple days. They have rebounded over the last three days and closed at a new high on Wednesday.

Update 11/4: Etsy was upgraded by the Investor's Business Daily to a relative strength of 91. This is very strong and puts it in a unique class where buyers should appear. Historically, stocks reaching 90 or above do very well over the following year.

Update 11/10: Etsy reported earnings of 12 cents that beat estimates for 5 cents. Revenue of $106.4 million rose 21.5% and beat estimates for $104.6 million. Markets revenue rose 11.2% and seller services revenue rose 30.6%. Active sellers rose 10.8% and active buyers rose 16.7%. Gross merchandise volume rose 13.2% to $766.4 million. Shares fell on a sell the news event but rebounded on Thr/Fri.

Position 9/14/17:

Long Dec $20 call @ 70 cents, see portfolio graphic for stop loss.

Previously closed 9/27: Long ETSY shares @ $17.79, exit $16.75, -1.04 loss.

FINL - Finish Line - Company Profile


No specific news. Holding over support.

Original Trade Description: October 21st

The Finish Line, Inc., together with its subsidiaries, operates as a retailer of athletic shoes, apparel, and accessories for men, women, and kids in the United States. The company offers athletic shoes, as well as an assortment of apparel and accessories of Nike, Brand Jordan, adidas, Under Armour, Puma, and other brands. It engages in the in-store and online retail of athletic shoes for Macy's Retail Holdings, Inc.; Macy's Puerto Rico, Inc.; and Macys.com, Inc., as well as online at macys.com. As of April 2, 2017, the company operated 573 Finish Line stores in 44 states in the United States and Puerto Rico. It also operates e-commerce site, finishline.com and mobile commerce site, m.finishline.com. The company was founded in 1976 and is based in Indianapolis, Indiana. Company description from FinViz.com.

This is a simple scenario. UK retailer Sports Direct has acquired an 8% interest in Finish Line as it tries to expand its presence in the USA. Sports Direct was acquiring additional shares through third parties in order to force an acquisition. In late August, Finish Line adopted a poison pill to prevent a forced takeover. Since that pill was enacted, the companies have been in discussions and insiders claim the deal is moving along nicely towards completion.

Wells Fargo said there was at least a 50% probability the deal would happen and they are targeting a sale in the $14 - $16 range. Shares are currently trading at $10.50 and EBITDA of 4.5. Wells Fargo said that would be the cheapest takeout in years. Staples was bought by Sycamore for 5.5 times in September. Since Staples had not posted positive comps in 10 years they believe Finish Line will be sold for more than the Staples rate.

Shares jumped on Friday after the company declared an 11-cent dividend.

I am recommending as own this stock ahead of earnings on Dec 22nd. If there is going to be a deal announced it should happen on or before earnings.

Update 10/31/17: Shares fell sharply on the Under Armour revenue drop and weak guidance. We were stopped out of the stock.

Position 10/23/17:

Long Feb $12 call @ 75 cents, see portfolio graphic for stop loss.

Previously closed 10/31: Long FINL shares @ $10.49, exit $9.50, -.99 loss.

GEO - GEO Group Inc - Company Profile


No specific news.

Original Trade Description: November 8th

The GEO Group, Inc. is a real estate investment trust. The firm invests in real estate markets of the United States, Australia, South Africa and the United Kingdom. It specializes in the ownership, leasing and management of correctional, detention and reentry facilities and the provision of community-based services and youth services. The firm own, lease and operate a broad range of correctional and detention facilities including maximum, medium and minimum security prisons, immigration detention centers, minimum security detention centers, as well as community based reentry facilities. It was formerly known as Wackenhut Corrections Corp. Company description from FinViz.com.

Earnings Jan 30th.

The company reported earnings of 31 cents on revenue of $566.8 million. Analysts were expecting $556 million. They guided for revenue of $557-$562 million for Q4. Funds from operations for the full year are expected to be $2.52-$2.54 with revenue of $2.25 billion. The funds from operations are a key metric for REITs and their ability to pay dividends. They declared a dividend of 47 cents in October and it was paid on Oct 30th.

GEO is the world's leading provider of diversified correctional, detention, community reentry and electronic monitoring services to government agencies around the world. They have 140 facilities with 96,000 beds.

Shares declined in August 2016 as President Obama was moving away from the private prison concept. When Trump won in November shares gapped open and rallied for six months. In May civil rights groups sued the government over private prisons for housing immigrants. Private pension funds withdrew investments from private prison companies. Shares declined for six months despite receiving new contracts from the government for multiple types of detention operations. The declines ended in August and a rebound began with the Oct 31st earnings.

There is resistance at $27.75 but based on the positive guidance and new Federal contracts, I believe that will be broken and we could see a return to $31-$32.

Update 11/13: Shares down another 39-cents after a week of gains. GEO announced the activation and commencement of operations at the 1,300 bed Ravenhall Correctional Center in Australia. The facility will be operated by GEO under a 25-year contract with the State of Victoria.

Position 11/9/17:

Long Mar $30 call @ 85 cents, see portfolio graphic for stop loss.

Previously Closed 11/14: Long GEO shares @ $26.90, exit $24.35, -1.55 loss.

SVU - Supervalu - Company Profile


No specific news.

Original Trade Description: October 28th

SUPERVALU INC., together with its subsidiaries, operates as a grocery wholesaler and retailer in the United States. The company operates through two segments, Wholesale and Retail. The Wholesale segment engages in the wholesale distribution of various food and non-food products to independent retail customers, such as single and multiple grocery store operators, regional chains, and the military. This segment also provides various services, such as retail store support, advertising, couponing, e-commerce, network and data hosting solutions, and training and certification classes, as well as administrative back-office solutions. As of February 25, 2017, this segment operated approximately 1,902 stores with a network spanning 40 states. The Retail segment operates retail stores that provide groceries and various additional products, including general merchandise, home, health and beauty care, and pharmacy products. This segment operated 217 stores under the Cub Foods, Shoppers Food & Pharmacy, Shop 'n Save, Farm Fresh, and Hornbacher's banners, as well as 2 Rainbow stores. The company's stores offer a range of branded and private-label products comprising perishable and nonperishable grocery products. SUPERVALU INC. was founded in 1871 and is headquartered in Eden Prairie, Minnesota. Company description from FinViz.com.

Supervalu has morphed into more of a wholesaler of groceries than a retailer. Given the movement by Amazon and Walmart into online groceries that may be the way to go.

For Q3 they reported adjusted earnings of 46 cents that beat estimates for 36 cents. Revenue of $3.8 billion narrowly beat estimates for $3.79 billion. Wholesale sales rose 63% from $1.7 billion to $2.7 billion while retail and corporate sales were flat. They announced the acquisition of Associated Grocers of Florida for $180 million. Associated had revenue of $650 million for the trailing 12 months. This is a major bolt on acquisition where they can add value and scale and increase their presence in Florida, the Caribbean, South America and Asia. In June they completed the acquisition of Unified Grocers, an active distributer on the West Coast for $390 million. Unified had revenue of $3.8 billion in 2016.

Shares of SVU have been declining since their high of $84 in April 2015. With these two acquisitions and the sale of the Sav-A-Lot division in 2016, the company is turning the business around. I like that they are reducing their exposure to retail and all the expenses and employee related hassles that go with running a retail grocery store. By focusing on the wholesale business they can reduce overhead and expand their reach and their profit margins.

Who knows, maybe Amazon will decide they need to buy a wholesale grocery distributor.

Earnings Jan 17th.

Position 10/30/17:

Long Jan $18 call @ $1.05, see portfolio graphic for stop loss.

Closed 11/8: Long SVU shares @ $16.13, exit 15.65, -.48 loss.

BEARISH Play Updates

HAWK - Blackhawk Network Hldgs - Company Profile


No specific news. Back over resistance.

Original Trade Description: October 18th.

Blackhawk Network Holdings, Inc. provides a range of prepaid gift, telecom, and debit cards in physical and electronic forms; and related prepaid products and payment services in the United States and internationally. It operates through three segments: U.S. Retail, International, and Incentives & Rewards. The company distributes closed loop gift cards in the areas of digital media and e-commerce, dining, electronics, entertainment, fashion, transportation, home improvement, and travel; non-reloadable open loop gift cards; and prepaid wireless or cellular cards that are used to load airtime onto the prepaid handsets, as well as sells handsets. It also offers general purpose reloadable (GPR) cards; and Reloadit, a GPR reload network product that allows consumers to reload funds onto their previously purchased third-party GPR cards. In addition, the company provides incentives solutions comprising solutions, which allow businesses to manage consumer incentive programs, including in-store, online, or mail-in rebate processing; a hosted software platform for managing sales person and sales channel incentive programs; bulk prepaid card ordering systems and Websites to allow business and incentive program clients to use prepaid cards as part of their incentive and reward programs; and direct-to-participant fulfillment services for prepaid cards, checks, and merchandise. Further, it offers Cardpool that provides an online marketplace and various retail locations to sell unused gift cards; digital services for online and mobile applications; and card production and processing services to its prepaid gift and telecom content providers. The company distributes its products through grocery, convenience, specialty, and online retailers. Company description from FinViz.com.

Blackhawk is in trouble. The company reported Q3 earnings of 18 cents that beat estimates for 10 cents but revenue of $208.1 million missed estimates for $216.5 million. The company guided for the full year for earnings of $1.56-$1.70 and analysts were expecting $1.68. They cut revenue guidance to $940-$981 million and analysts were expecting $1.1 billion.

The CEO said, "We have recently seen increasing competitive pressures in some retail markets and believe this will result in lower growth in our U.S. retail physical channels going forward."

PayPal, Visa and MasterCard are making a big push into prepaid cards. Blackhawk is fighting the three giants in the market and apparently, they are losing market share.

Shares fell $10 on the earnings and have continued to bleed points in the days that followed. They are at a 52-week low and are approaching a 3-year low at $30. Investors tend to flee when companies warn of increased competition and falling market share. If the $30 level breaks, the next support is around $23.

Earnings January 10th.

Because the stock is over $30 this will be an option only position.

Position 10/19/17:

Long Dec $30 put @ .50, see portfolio graphic for stop loss.

LE - Lands End - Company Profile


No specific news.

Original Trade Description: November 6th.

Lands' End, Inc. operates as a multi-channel retailer in the United States, the United Kingdom, Germany, and Japan. The company operates through two segments, Direct and Retail. It offers casual clothing, accessories, footwear, and home products. The company sells its products online through landsend.com, and affiliated specialty and international Websites; direct mail catalogs; and retail locations primarily at Lands' End Shops at Sears, Lands' End Inlet stores, and international shop-in-shops. As of January 27, 2017, it operated 216 Lands' End Shops at Sears; and 14 Lands' End Inlet stores. Lands' End, Inc. was founded in 1963 and is headquartered in Dodgeville, Wisconsin. Company description from FinViz.com.

Earnings Dec 5th.

Hardly a month goes by without Sears (SHLD) announcing the closure of several dozen additional stores. The Lands End retail base is slowly eroding.

For Q2 they announced a loss of 12 cents and analysts were expecting 9 cents. Revenue of $303.3 million did beat estimates for $292.6 million only because analysts were so negative on the outlook. The company reported a 5.5% increase in direct sales but the retail segment posted a 7.4% decline in revenue. They blamed that decline on the hundreds of stores Sears has closed or announced to be closed in 2017. On the positive side the remaining retail stores produced a 3.8% increase in same store sales.

Unfortunately, the light at the end of the tunnel is a train coming right at them with Sears holding the equivalent of a going out of business sale from now through Black Friday with everything in the store marked down from 10% to 50%. I would not be surprised to see a drastic restructuring of Sears announced after the holidays. With Sears closing dozens of stores per quarter they only have about 450 left and those could be cut in half or worse at year end.

Every bounce in LE is sold and they are only about 20 cents from a record low close.

The plan would be to hold the put over the Nov 30 earnings.

Position 11/7/17:

Long Dec $10 put @ $40 cents, see portfolio graphic for stop loss.

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