Special Buy Alert: March 18, 2014

| March 18, 2014

Special Buy Alert:  March 18, 2014


Trade Details

Buy Facebook (FB) April 19th $72.50 Calls for $1.85 or better

Buy Travelzoo (TZOO) April 19th $22.50 Calls for $1.85 or better

Buy Abercrombie & Fitch (ANF) May 17th $38 Puts for $1.80 or better



Today’s the day we kick start our portfolio with not one, but three new trades.  For this special set of trades, we’re going to be focusing on the break out of Internet stocks.  Why?  Because you can’t argue with results.

You see, since March 2009 (when the current bull market began), the S&P 500 is up 177%.  Not bad.  However, over the same timeframe, the NASDAQ Internet Index is up a whopping 493%!  And so far this year, Internet stocks continue thrive and outperform the overall market.  Investors are once again scrambling to be a part of all things Internet.  Fortunately, this time around, the craze is mostly backed up by fundamental data (unlike the Internet craze from the turn of the century).

We’re going to start off by buying calls on one of the leading Internet companies and undisputed king of social media, Facebook (FB).  The company has continued to beat expectations and defy critics.  Now, FB is launching video ads which could significantly enhance ad revenues moving forward.  I simply cannot justify buying into the Internet group without having a position in perhaps the industry’s greatest success story, Facebook.

While FB is an established Internet leader, out next pick is definitely more speculative.  Travelzoo (TZOO) provides travel, entertainment, and local deals to consumers worldwide.  The company tends to fly below the radar for most investors despite showing revenue growth and holding over $66 million in cash.  TZOO is also trading below its 200-day moving average and looks to be setting up for a run higher.

Finally, we’re going to take a bearish position in an industry which is mostly likely to suffer because of the growing success of Internet companies.  In this case, we’re going to buy puts in a retail company relying heavily on brick and mortar sales.  As you probably know, more and more consumers are shopping online.  Traditional brick and mortar companies continue to lose market share.

This is becoming especially noticeable in retail apparel stores, who have been struggling since the second half of 2013.  One of the most notable underperformers in this space is Abercrombie & Fitch (ANF).  ANF is losing sales and the company’s earnings are way down.  Yet, the stock is still trading above its 200-day moving average.  I believe the reality of the company’s situation is going to catch up to it soon enough, and the shares could drop back down to the 50-day moving average or farther.


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Abercrombie & Fitch


Category: OTW Buy Alerts