We are one week into April with one week to go before the volatility begins again.

The market is just passing time while it waits for tax day on April 15th to pass and the normal market dip as money is extracted to pay the taxes. This is normally just a couple day event and it is a blip rather than a major decline.

However, the last week of April could be very volatile. Lawmakers come back from their Easter recess on April 24th and they only have five days to hammer out a funding bill and raise the debt ceiling or face a partial government shutdown. Both sides have already staked out their mandatory requirements and it should surprise nobody that they do not match. The last week of April could see a significant volatility event.

Investors understand the calendar. This is a holiday-shortened week with the market closed on Friday. Volume was only 5.47 billion shares on Monday and it is not likely to improve the rest of the week. With the exception of Thursday morning, it should be a ghost town in the market.

The Q1 earnings cycle kicks off on Thursday with most of the major banks reporting before the open. That is the only material earnings for the week. The rest of the blue chips begin reporting the following week.

The major indexes are moving sideways and each posted only a low single digit gain on Monday. The Dow only gained 1.9 points after a 135 point round trip from resistance at 20,750 and back to support at 20,600 before returning to its starting point. Only four Dow components gained or lost more than $1.

The Dow chart is showing a perfectly sideways trend between support and resistance with intraday excursions outside those boundaries, quickly erased. The Dow remains the weakest big cap index but the S&P is catching up. Note the last three candles on the chart are almost identical.

The S&P is an almost identical chart with the last three candles showing a lot of intraday movement but returning to neutral at the close. Resistance at 2,370 and support at 2,350 are the key levels to watch.

The Nasdaq indexes remain the strongest segment of the market. The Composite and the Nasdaq 100 are both clustering near the new high resistance and could break out at any time if a suitable catalyst appeared. That may require waiting until the Nasdaq big caps report in the week after April 15th but before week 4 and the potential political disaster.

The Nasdaq Composite has resistance at 5,915 with the current historic high at 5,914. The index has traded over that level multiple times but never closed over that March 26th high.

The small cap indexes have quit falling with the Russell 2000 posting minor gains for the last three days. However, the S&P-600 chart is still bearish until we have a close back over 845. Trying to predict market direction from day to day is a fool's errand. We have to wait for the chart to tell us with either a close under 820 or over 845. Until then it is just noise.

The market is just passing time while it waits on the bank earnings and the holiday weekend. With April 15th on a Saturday that suggests the tax volatility will be the first couple days of next week, if it happens at all. There will be a full calendar of earnings next week and that could take investor's minds off of the impending legislative squabble the following week.

Given the potential for a really ugly fourth week, it is too much to hope for lawmakers to have a kumbaya moment and decide to compromise? I am afraid that would be too much to ask. The odds are good that the republicans will not even be able to agree on a solution. It will be interesting to watch but it may not be good for the market.

Stocks have been moving sideways to down for the last three weeks. It may not be apparent in the Nasdaq index but the Dow, S&P and Russell are clearly showing the weakness. I am frustrated with the nonperformance of the stocks in the portfolio but nothing is moving, not just our stocks. We need the market to pick a direction and get past April without a major loss.

Jim Brown

Send Jim an email


CRM - Salesforce.com - Company Profile

Salesforce.com, inc. develops enterprise cloud computing solutions with a focus on customer relationship management. The company offers Sales Cloud to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence, and collaborate around sales on desktop and mobile devices, as well as solutions for partner relationship management. It also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connects their service agents with customers on various devices; and Marketing Cloud to plan, personalize, and optimize one-to-one customer interactions. In addition, the company offers Commerce Cloud to deliver a digital commerce experience; Community Cloud to create and manage branded digital destinations for customers, partners, and employees; Internet of Things Cloud that provides insights to companies enabling them to sell, service, and market to their customers in personalized ways, as well as engage with them in real time; and Analytics Cloud that enables employees across an organization to explore business data, uncover new insights, make decisions, and take action from various devices. Further, it provides Salesforce Quip, a next-generation productivity solution for teams with a mobile-first strategy to collaborate without email; and Salesforce Platform for building enterprise apps. Additionally, the company offers professional cloud services, such as consulting, deployment, training, user-centric design, and integration to facilitate the adoption of its solutions; and architects and innovation program teams, as well as various education services comprising introductory online courses and advanced architecture certifications. Salesforce.com, inc. offers its services through direct sales; and through consulting firms, systems integrators, and other partners. Company description from FinViz.com

Evercore ISI penned an article in Barrons last week saying they expect Salesforce to grow annual revenue to $20 billion within four years. They see +20% revenue growth over the next several years and a 20% upside in the stock price in the next 6-12 months. They have a short term price target of $100.

Last week Salesforce received a government classification of Impact Level 4 or IL 4 for short. With this certification, government agencies and employees are free to use the Government Cloud for controlled, unclassified information.

There is also a persistent rumor that Salesforce could be acquired. Google has been speculated as a potential candidate. With Oracle, Microsoft and IBM trying to compete in this market, having Google's big bucks behind Salesforce would help them compete.

Earnings May 30th.

With the stock up 21% YTD there could be some profit taking if the market decides to rest. Support is around $81.

Futures are falling overnight so I am picking a closer to the money strike in hopes we get a gap lower open on Tuesday. If the market does open lower, let the call premiums breathe for a few minutes before adding the position. It normally takes 10-15 minutes for them to settle. Obviously if the market continues to fall then wait for a bottom to appear before entering the position.

Buy June $85 call, currently $3.55, initial stop loss $80.65

If there is a trade you would like me to consider or you have comments on this newsletter please click the email link below.

Jim Brown

Send Jim an email

Current Portfolio

Open Positions

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline. Any items shaded in blue were previously closed.

Current Position Changes

SPY - S&P-500 ETF
The long put position remains unopened until a trade at $232.75.

SBUX - Starbucks
The long call position was entered at the open on Tuesday.

UBNT - Ubiquiti Networks
The long call position was stopped at the open on Thursday.

Original Play Recommendations (Alpha by Symbol)

ATVI - Activision Blizzard - Company Profile


No specific news. Shares faded back to support from the new high the prior week. The difference is only $1 so it was not a big move.

Original Trade Description: March 6th.

Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Company description from FinViz.com

Activision reported Q4 earnings of 92 cents that beat estimates for 73 cents. Revenue of $2.45 billion beat estimates for $2.35 billion.

The new Overwatch game was the fastest Blizzard title to hit 25 million registered players. Monthly active users (MAU) rose 5 million at Activision to reach 51 million. Bllizzard's MAU fell 1 million to 41 million but set a record for Q4. Kind Digital users fell from 394 million to 355 million. Since King Digital is phone games the numbers tend to be volatile. Users spent 43 billion hours playing ATVI's suite of games in Q4 compared to the 45 billion hours peopls spent watching Netflix.

Shares spiked despite weak guidance. They guided for Q1 for $1.05 billion and earnings of 18 cents. The street was looking for $1.2 billion and 31 cents. For the ful lyear they guided for $6.3 billion and $1.85 in earnings. That missed street estimates for $6.68 billion and $2.03. Fortunately, ATVI normally guides low and then crushes the estimates when they report.

Earnings May 11th.

Shares spiked from $39 to $47 on the earnings. Post earnings depression appeared for four weeks and shares sank back to $45. Over the last several days the uptrend has resumed and Monday was a new high close at $47.81.

Position 3/6/17:

Long May $50 call @ $1.29, see portfolio graphic for stop loss. .

CAH - Cardinal Health - Company Profile


Cardinal is said to be close to a deal to acquire the medical supplies unit from Medtronic. The deal is expected to be worth about $6 billion. Cardinal acquired a similar business when it bought Covidien in 2014 for $43 billion. Shares are holding near their recent highs. Continue targeting $85 to exit.

Original Trade Description: February 20th

Cardinal Health, Inc. operates as a healthcare services and products company worldwide. The company's Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare, specialty pharmaceutical, and consumer products to retailers, hospitals, and other healthcare providers. It offers distribution, inventory management, data reporting, new product launch support, and contract pricing and chargeback administration services to pharmaceutical manufacturers; pharmacy and medication therapy management, and patient outcomes services to hospitals, other healthcare providers, and payers; consulting, patient support, and other services to pharmaceutical manufacturers and healthcare providers. This segment also operates nuclear pharmacies and cyclotron facilities that manufacture, prepare, and deliver radiopharmaceuticals, as well as operates direct-to-patient specialty pharmacies; offers logistics, marketing, and other services; and repackages generic pharmaceuticals and over-the-counter healthcare products. The company's Medical segment distributes a range of medical, surgical, and laboratory products and services to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers, as well as to patients in the home. This segment also develops, manufactures, and sources medical and surgical products comprising surgical drapes, and gowns and apparel; exam and surgical gloves; fluid suction and collection systems; cardiovascular and endovascular products; and wound care and orthopedic products, as well as assembles and offers sterile and non-sterile procedure kits. In addition, it offers supply chain services, including spend, distribution, and inventory management services to healthcare providers; and post-acute care management, and transition services and software to hospitals, other healthcare providers, and payers. Company description from FinViz.com

Cardinal reported earnings of $1.34 compared to estimates for $1.24. Revenue of $33.1 billion just missed estimates for $33.4 billion. Pharmaceutical revenues rose 5% to $29.7 billion. Medical segment revenues rose 8% to $3.4 billion. Pharmaceutical segment profits fell 14% to $537 million because of the loss of a major customer. They expect this to be made up in future quarters by the solid performance of Red Oak Sourcing. Medical segment profits rose 50% to $159 million thanks to a higher contribution from Cardinal Health Branded products.

They guided for full year earnings of $5.35-$5.50 and growth of about 4%.

Earnings May 9th.

Analysts believe Cardinal guided conservatively and will beat guidance because of the growth in their own branded products. Shares spiked on the earnings, faded for three days and are now surging. We are going to target resistance at $85 for an exit.

Position 2/21/17:

Long Jun $82.50 calls @ $2.85, see portfolio graphic for stop loss, target $85 to exit.

HAIN - Hain Celestial - Company Profile


No specific news. Shares are holding at the $37 level while we wait for the next headline.

Original Trade Description: March 20th

The Hain Celestial Group, Inc. manufactures, markets, distributes, and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula; infant, toddler, and kids foods; diapers and wipes; rice and grain-based products; flour and baking mixes; breads, hot and cold cereals, pasta, condiments, cooking and culinary oils, granolas, granola bars, and cereal bars; canned, chilled fresh, aseptic, and instant soups; Greek-style yogurt; chilies and packaged grains; and chocolates and nut butters, as well as plant-based beverages and frozen desserts, such as soy, rice, almond, and coconut. The company's grocery products also comprise juices, hot-eating, chilled and frozen desserts, cookies, crackers, gluten-free frozen entrees and bars, frozen pastas and ethnic meals, frozen fruits and vegetables, cut fresh fruits, refrigerated and frozen soy protein meat-alternative products, tofu, seitan and tempeh products, jams, fruit spreads and jelly, honey, marmalade, and other food products. In addition, it provides snack products, such as potato, root vegetable, and other vegetable chips, as well as straws, tortilla chips, whole grain chips, pita chips, puffs, and popcorn; specialty teas, including herbal, green, black, wellness, rooibos, and chai tea lattes; ready-to-drink beverages comprising organic kombucha and chai tea lattes; personal care products consisting of skin, hair and oral care, deodorants, baby care items, acne treatment, body washes, and sunscreens; and poultry and protein products, such as turkey and chicken products. The company sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, and drug and convenience stores in approximately 70 countries worldwide. Company description from FinViz.com

We played Hain before back in the fall. Basically, they have not filed their quarterly reports since last May because of a review of accounting procedures. They have suffered over the last year and have reportedly spent $20 million in the complete accounting review for years past and a review of their procedures. They are facing class action suits and SEC probes but none of these things will have a lasting impact.

They are facing a new deadline of May for their reports or they will be in default with their lenders. While they will not say when they will file the back reports, they continue to assure investors there was no wrongdoing and these types of corporate autopsies for prior years take time.

They are so undervalued compared to their peers and their historical norms, it is silly not to have a long position. Once they file the reports this will all be behind them.

I am recommending we buy the August $40 call and forget about it. At $2 it is not a lot of money and they could quickly return to the $50s once they file the reports.

Position 3/21/17:

Long Aug $40 call @ $1.97, see portfolio graphic for stop loss.

JACK - Jack in the Box - Company Profile


JACK shares fell $1 today after the company announced the CFO would retire in 2018. Why that would cause a knee jerk sell reaction is unknown.

Original Trade Description: March 13th.

Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants and Qdoba Mexican Eats fast-casual restaurants primarily in the United States. As of October 02, 2016, it operated and franchised approximately 2,255 Jack in the Box restaurants in 21 states and Guam; and approximately 699 Qdoba Mexican Eats restaurants in 47 states, the District of Columbia, and Canada. The company was founded in 1951. Company description from FinViz.com

Shares of JACK were crushed in late February when they reported earnings of $1.18 compared to estimates for $1.24. Revenue of $487.9 million also missed estimates for $498.5 million. They guided for the full year to earnings of $4.25 to $4.50. Analysts were expecting $4.71.

They blamed the closig of several stores, employee severance pay and lower margins at the Qdoba chain.

If you have stopped at a Qdoba recently you know they have raised prices significantly on products that are not the mainline menu items. All the prices have gone up but some as much as 30%. That means Q1 revenues and earnings should be significantly better assuming the higher prices did not run off the consumers. However, a change in a main menu food item from $3.49 to $3.79 is not a disaster. Where they raised prices the most was in the sides where prices rose from 79 cents to $1.49 on some items. That is a major increase but it would only affect a portion of their sales.

Earnings May 29th.

After earnings the stock fell from $107 to $93 and stayed there for just over a week. Over the last two weeks shares have slowly ticked higher to $98. The post earnings depression appears to have faded and investors are coming back into the previously high flyer. Finding stocks that are not overbought in this market is a tough task and a quality stock like JACK that was severely beaten up suddenly looks like a value stock.

I am not recommending the $100 strike because the options are too expensive. I am going to stretch out to the $105 strike but that means we need the rebound to continue unabated in order to be profitable.

Position 3/15/17:

Long June $105 calls @ $2.80, see portfolio graphic for stop loss.

NTCT - Net Scout - Company Profile


No specific news. Shares are holding over support while we wait for the market to move higher.

Original Trade Description: February 27th

NetScout Systems, Inc. provides real-time operational intelligence and performance analytics for service assurance, and cyber security solutions in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks, as well as gain timely insight into services, applications, and systems. It also provides Intelligent Data Sources under the Infinistream brand name that provide real-time collection and analysis of data from the network; network monitoring fabric switching solutions that deliver targeted network traffic access to an increasing number of monitoring systems; and a suite of test access points that enable non-disruptive access to network traffic with multiple link type and speed options. In addition, the company offers portable network analysis and troubleshooting tools, which help customers identify key issues that impact network and application performance. Further, it provides security solutions that enable service providers and enterprises to protect their networks against DDoS attacks; and threat detection solutions that enable enterprises to identify and investigate advanced threat campaigns that present tangible risks to the integrity of their networks. Company description from FinViz.com

Jeff Ubben at ValueAct added NetScout as a new position with 1,645,000 shares. Ken Fisher of Fisher Asset Management owned 3.6% at the end of Q4.

The company specializes in network assurance and network performance management.

They reported earnings of 60 cents compared to estimates for 55 cents. Revenue of $311.4 million also beat the street's estimate for $310 million. They guided for full year earnings in the range of $1.87-$1.90 on revenue of $1.2 billion.

Earnings May 2nd.

Shares exploded out of the earnings report and moved to a new 52-week high at $38. They paused there for the last week but closed at a new high by a few cents on Monday. I believe a breakout is about to appear.

Position 2/28/17:

Long June $40 call @ $2.45, see portfolio graphic for stop loss.

SPY - S&P-500 SPDR ETF - ETF Profile


The S&P continues to move sideways as the market waits for the earnings season to begin and the end of April events in Washington. No change in the outlook.

This position remains unopened until a trade at $232.75.

Original Trade Description: March 27th.

The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol. SPDR is an acronym for the Standard & Poor's Depositary Receipts, the former name of the ETF. It is designed to track the S&P 500 stock market index.

The S&P-500 is in danger of a material drop, possibly to 2,250 or the equivalent 225 level on the SPY ETF. The chart is unsupported and we are entering into a typically volatile period of the year over the next five weeks. I am recommending we buy a put on the SPY only IF the SPY trades at 232.75. Before Monday's dip that would have been a new five-week low. Regardless of what happens on Tuesday we will be ready for the next leg down.

I believe if the market goes lower this week it could be the beginning of a major decline.

With a SPY trade at $232.75

Buy June $230 put, currently $3.97, initial stop loss $239.25

SBUX - Starbucks - Company Profile


Starbucks bounced off resistance at $59 last Wednesday and is passing time at $58 while we wait for the market to pick a direction. Shares suffered some weakness after JAB said it was acquiring Panera Bread for $7 billion. Panera is Starbucks biggest competitor even though they do not have the scale or the pure coffee focus. However, with a little management direction they could be a major competitor because their food beats Starbucks food, hands down. This would be a 2-3 year transition and then a 2-3 year build out so it is not going to happen before our May option is closed.

Original Trade Description: April 3rd.

Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates in four segments: Americas; China/Asia Pacific; Europe, Middle East, and Africa; and Channel Development. Its stores offer coffee and tea beverages, packaged roasted whole bean and ground coffees, single-serve and ready-to-drink coffee and tea products, juices, and bottled water; an assortment of fresh food and snack offerings; and various food products, such as pastries, breakfast sandwiches, and lunch items, as well as beverage-making equipment and accessories. The company also licenses its trademarks through licensed stores, and grocery and national foodservice accounts. It offers its products under the Starbucks, Teavana, Tazo, Seattle's Best Coffee, Evolution Fresh, La Boulange, Ethos, Frappuccino, Starbucks Doubleshot, Starbucks Refreshers, and Starbucks VIA brand names. As of November 3, 2016, the company operated 25,085 stores. Company description from FinViz.com

I have had trouble playing Starbucks over the last couple of years. The company always seems to have everything going for it but the stock heads in the opposite direction. There have been three major sell offs since December. Maybe this time it is different.

In mid March the company disclosed a series of changes that suggest the company has finally found the key to financial success. At the company shareholder meeting the board disclosed plans to hire 240,000 additional employees by 2021. Since they only have 330,000 workers today that is a major increase. In order to do that they would have to be planning for a significant jump in revenue and profits. Of those new jobs 68,000 would be in the USA.

They also announced plans to open 12,000 new stores of which 3,400 would be in the USA. They currently have nearly 26,000 stores globally. They are also planning on implementing a new menus with sandwiches and salads along with new varieties of premium craft teas. Manu of their stores will be adding alcohol to attract the evening crowds.

They have so many current customers it is hurting business. Ordering and paying through the mobile app has become so easy and so popular, it is jamming the stores with customers and causing long wait times for drinks. Starbucks is working on a method to streamline the process and using employees to surge mobile orders into specific stores to see if the new methods are working before implementing them system wide. They are also testing walk up windows for mobile orders so the customers do not have to come into the store.

They even implemented voice ordering through Amazon's Alexa app. A survey last year found that collectively, have more money in their Starbucks accounts than they do in some banks.

Starbucks guided for $30 billion in revenue by fiscal 2019 and that target appears easily reached with all the new initiatives.

Crowded stores are a problem for consumers but when that many people are standing in line to give the retailer money, it is a good problem to have.

Earnings April 27th.

This is going to be a short fused position since earnings are less than four weeks away. However, the May option is only 79 cents and I am planning on holding over the earnings report unless we are already strongly profitable ahead of earnings. We will make that decision the week of earnings. After several quarters of disappointments, this could be a quarter with a positive surprise.

Shares are close to a new 52-week high but that also means old high resistance at $59. A break over that level could trigger some serious short covering.

Position 4/4/17:

Long May $60 call @ 76 cents, see portfolio graphic for stop loss.

TRIP - Trip Advisor - Company Profile


No specific news. The Priceline acquisition rumors have not resulted in any announcements. Shares are not declining so there is still investor interest.

Original Trade Description: March 6th.

TripAdvisor, Inc. operates as an online travel company. The company operates through two segments, Hotel and Non-Hotel. Its travel platform aggregates reviews and opinions of members about destinations, accommodations, activities and attractions, and restaurants, which enables users to research and plan their travel experiences, as well as book hotels, flights, cruises, vacation rentals, activities and attractions, and restaurant reservations. The company operates TripAdvisor-branded Websites, including tripadvisor.com in the United States; and localized versions of the Website in 48 markets and 28 languages. It also manages and operates 23 other media brands that provide travel planning resources across the travel sector, such as airfarewatchdog.com, bookingbuddy.com, citymaps.com, cruisecritic.com, familyvacationcritic.com, flipkey.com, gateguru.com, holidaylettings.co.uk, holidaywatchdog.com, housetrip.com, independenttraveler.com, jetsetter.com, thefork.com, niumba.com, onetime.com, oyster.com, seatguru.com, smartertravel.com, tingo.com, travelpod.com, tripbod.com, vacationhomerentals.com, and viator.com. The company's Websites feature 465 million reviews and opinions on 7 million places comprising 1,060,000 hotels and accommodations; 835,000 vacation rentals; 4.3 million restaurants; and 760,000 activities and attractions worldwide. Company description from FinViz.com

TRIP re;orted Q4 earnings of 16 cents that missed estimates for 30 cents. Revenue of $316 million missed estimates for $325 million. Shares fell from $52 to $40 over the three weeks since the earnings report.

TRIP missed earnings for two main reasons. They have been investing "significant" amounts of money into new processes and marketing that will pay off in the future. Secondly, they just implemented an "Instant Booking" platform that was different enough that customers became confused and they lost a lot of revenue in Q4.

However, sales on the platform improved in December and spiked higher in January as the company refined its processes and made it easier to understand. They spent money marketing the benefits of the platform and apparently business is improving significantly in Q1.

TRIP has had earnings challenged for the last three quarters as they invest heavily in developing for the future.

Earnings May 17th.

Shares appear to have bottomed at $41 having spent the last five days at that level. While we cannot be certain this is the bottom, the option is cheap enough to induce me to take the risk. Once the stock begins to bounce, it should attract some more buyers looking for a bargain. With the market starting to turn choppy, any actual decline will make stocks like this look appetizing since they have already been crushed.

Update 3/13/17: Shares spiked on Wednesday to $44 after Cowen said the chairman's comments the prior week suggested there were some takeover conversations in progress. The chairman said the "company's appeal to a potential buyer acts as a floor on the stock." He named Facebook, Amazon and Alibaba as potential buyers. That is very unusual for a board member to suggest there may be interest by other parties and then name them. Another analyst said the comments were actually negative since the board member was using the takeover appeal to "prop up the stock." Personally, I hope the chairman stimulated some interest by those companies.

Position 3/7/17:

Long June $45 call @ $2.10, see portfolio graphic for stop loss.

UBNT - Ubiquiti Networks - Company Profile


No specific news. The rebound rally we bought into failed and we were stopped out at $48.65 on the 4th.

Original Trade Description: March 20th.

Ubiquiti Networks, Inc. develops networking technology for service providers and enterprises worldwide. The company's service provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems, and routing; and enterprise product platforms provide wireless LAN infrastructure, video surveillance products, switching and routing solutions, and machine-to-machine communication components. Its products and solutions include radios, antennas, software, communications protocols, and management tools designed to deliver carrier and enterprise class wireless broadband access and other services in the unlicensed RF spectrum. The company also provides technology platforms, such as airMAX platform, which includes proprietary protocols that contain technologies for minimizing signal noise; EdgeMAX, a disruptive software and system routing platform; AirFiber, a point-to-point radio system; and sunMAX, an end-to-end plug and play solar solution. In addition, it offers UniFi Enterprise Wi-Fi System that includes Wi-Fi certified hardware with a software based management controller; UniFi Video IP cameras for data transmission and power-over-Ethernet; UniFi Switches that deliver performance, switching, and PoE+ support for enterprise networks; and UniFi Security Gateway that extends the UniFi enterprise solutions to provide routing and network security. Further, the company provides mFi that consists of hardware sensors, power devices, and management software, which allow devices to be monitored and controlled remotely through Wi-Fi; and develops AmpliFi platform, a Wi-Fi system solution designed to serve connected home. It also offers embedded radio products; and mounting brackets, cables, and power Ethernet adapters. Company description from FinViz.com

UBNT shares were crushed in February from $64 to $46 when they reported earnings of 71 cents that missed estimates for 75 cents. However, revenue of $213.5 million blew past estimates for $205 million. They ended the quarter with $612.7 million in cash and long-term debt of $184.2 million.

Earnings rose 24.1% and revenues by 31.9% but that was not good enough for investors. Revenue in the enterprise technology segment roas 87.4% to $98 million thanks to the new UniFi product family. North American revenues rose 64.8% and European/Middle East/Africa rose 26.9% and Asia Pacific 11.5%. South America was the weak spot with a 17.9% decline.

Earnings May 11th.

The stock was crushed because UBNT has a habit of beating on earnings and the unexpected decline was a shock. However, business is great and they are launching new products that are significantly faster.

I believe the massive $18 drop was overdone and shares are rising again. Analyst expectations are still bullish and only one downgraded the stock after earnings.

Position 3/21/17:

Exit 4/4/17: Long June $55 call @ $2.90, exit .95, -1.95 loss.

Prices Quoted in Newsletter

At Option Investor, we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.

The prices quoted in the newsletter are the end of day prices in most cases.

When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.

For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time readers are able to get a better fill than the opening print because of market maker bias at the open.

For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.

All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.