3 fast holiday week trades to make today

Pad your portfolio with great opportunities on these companies on the verge of earnings reports.

By Traders Reserve Nov 25, 2013 3:10PM

A Barnes and Noble storefront is pictured in New York. © Brendan McDermid/ReutersBy Jamie Dlugosch


Last week’s market action was remarkable in many ways beyond the major market indexes closing across key psychological thresholds. I’ve never seen so many so called experts -- pros and talking heads -- calling for a market reversal or worse a downright crash.

 

Give me a break.

 

It was virtually guaranteed that stocks were going to go up last week, and that is exactly what they did. Friday’s powerful surge was a strong punctuation mark to a week of incessant guessing at a correction that never materialized. Anyone acting with such hubris thinking that they could predict the exact time the market would reverse course is ludicrous, of course.

 

You can’t time the market, plain and simple, but you can still make money. This week is a holiday-shortened week, but there are pockets of opportunity for those looking to pad their portfolios. For those of you not entirely paralyzed by fear, we’ll go out on the risk curve for some fast-action option trades.

 

While everyone else is indulging in their turkey and trimmings, we’ll be building equity and perhaps a little extra spending money for the holiday season.

 

Here’s where I see the best opportunities for easy trades this week:

 

Barnes & Noble (BKS)

I’m always amused when discussing Barnes & Noble. Its ticker symbol -- BKS -- makes me think of one thing: bankruptcy.

 

How this company has stayed its execution is beyond me. That said it takes a long time for these things to die. Just think . . . it was only recently that Blockbuster closed its last store.

Nook might be a solid competitor to Kindle, but can a large box seller of books really survive in this environment?

 

We learn more this week when the company reports earnings on Tuesday before the market opens. Analysts expect a small loss of 4 cents per share. Longer term, there just doesn’t seem to be any end to the red ink.

 

Look for more bad news. I’d play this one with an at the money put option with a December expiration.

 

Hewlett-Packard (HPQ)

I’ll admit that I didn’t think Hewlett Packard had much of a chance to survive a late jump in the tablet wars amidst a stunning decline in sales of the personal computer. Kudos to CEO, Meg Whitman. She came in with a purpose and has done a remarkable job at righting the ship.

Investors have rewarded the company each step of the way. Next up is growth in the future including launching a 3-D printing product in 2014.


We’ll learn more when the company reports earnings after the market closes on Tuesday. Analysts expect the company to make $1 per share. Hewlett Packard matched estimates last time out, but beat the number three times prior to that.


I expect a beat here at a minimum and solid guidance for 2014. It won’t be flashy, but should be enough to lift the stock after the news is released. I would play this one with an at the money Call option with a December expiration.

 

Tiffany (TIF)

Like many companies, luxury jewelry retailer Tiffany has had a roller-coaster go of it the last year or two. At the moment the company is at a peak. Shares trade at or near 52-week highs thanks to two very solid operating quarters that greatly exceeded expectations.

 

Can Tiffany do it again and will it be enough to further boost shares?

 

I’m not so sure I would play it that way. In fact the set-up looks attractive for Put options here. A weak report will send the stock tumbling. Even a good report might not be enough to push the stock from here.

 

The reason is valuation. Analysts expect the company to grow profits by 13.5% in the next fiscal year ending Jan. 31, 2015. At current prices shares trade for 22 times current fiscal year estimated earnings.

 

That’s a rich valuation no matter how strong recent performance. I like the odds on this one with what appears to be minimal downside risk. The company reports results on Tuesday before the market opens. Play the at the money puts with a December expiration.

 

More from Traders Reserve


 

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