I already did a full rundown on GDP . We tweeted it out from our Live Member Chat Room this morning and you can read all about it here , so I'm not going to waste time going over it all again as there are lots of other important things to talk about. First on my list is Lumber Liquidators (LL), which was one of the 3 Top Trades we featured on Monday at Seeking Alpha to show people how clever we are at picking stocks. We're not looking so clever this morning as LL had their earnings report and the stock is down 17%, to $27.65, on news of a $7.78M loss for Q1 (0.29/share) vs a $13.7M profit (0.49/share) in last year's Q1. $2.3M of that loss came from Home Test Kits the company sent to it's customers to verify that their floorboards weren't killing them and legal costs pretty much made up the rest. Same-Store Sales, surprisingly, were only down 1.8% despite all the negative publicity but the company also announced that Federal Charges were pending under the Lacey Act , which is a 1907 law governing the import of plant products. There are also 100 class-action suits pending, so the legal issues aren't going away soon and will continue to hurt profits – even while the customers continue shopping. While it will be a long turnaround, we stand by our trade idea, which was: Our trade idea for LL consists of selling 5 of the 2017 28 puts for $6.90 ($3,450), which obligates you to buy 500 shares of LL at $28 ($14,000 total potential risk on the trade if LL goes BK). We can then use the money collected to buy 10 of the 2017 $30/40 bull call spreads at $3.46 ($3,460) for net $10 on $10,000 worth of spreads. With any luck, we'll have an opportunity today to position this trade more aggressively as LL drops back below $30 but I'll tell you right now that this is a ridiculous over-reaction to news that has already been out and is well-priced into the deeply discounted shares. Obviously, this is not an unfixable problem – they ALLEGEDLY sold wood that was sub-standard and the stock is now trading at 60% off. I'm done trying to convince you at this point . IN PROGRESS
I already did a full rundown on GDP.
We tweeted it out from our Live Member Chat Room this morning and you can read all about it here, so I'm not going to waste time going over it all again as there are lots of other important things to talk about.
First on my list is Lumber Liquidators (LL), which was one of the 3 Top Trades we featured on Monday at Seeking Alpha to show people how clever we are at picking stocks. We're not looking so clever this morning as LL had their earnings report and the stock is down 17%, to $27.65, on news of a $7.78M loss for Q1 (0.29/share) vs a $13.7M profit (0.49/share) in last year's Q1. $2.3M of that loss came from Home Test Kits the company sent to it's customers to verify that their floorboards weren't killing them and legal costs pretty much made up the rest.
Same-Store Sales, surprisingly, were only down 1.8% despite all the negative publicity but the company also announced that Federal Charges were pending under the Lacey Act, which is a 1907 law governing the import of plant products. There are also 100 class-action suits pending, so the legal issues aren't going away soon and will continue to hurt profits – even while the customers continue shopping. While it will be a long turnaround, we stand by our trade idea, which was:
Our trade idea for LL consists of selling 5 of the 2017 28 puts for $6.90 ($3,450), which obligates you to buy 500 shares of LL at $28 ($14,000 total potential risk on the trade if LL goes BK). We can then use the money collected to buy 10 of the 2017 $30/40 bull call spreads at $3.46 ($3,460) for net $10 on $10,000 worth of spreads.
With any luck, we'll have an opportunity today to position this trade more aggressively as LL drops back below $30 but I'll tell you right now that this is a ridiculous over-reaction to news that has already been out and is well-priced into the deeply discounted shares. Obviously, this is not an unfixable problem – they ALLEGEDLY sold wood that was sub-standard and the stock is now trading at 60% off. I'm done trying to convince you at this point.
IN PROGRESS
