WEEKLY ISSUE: Updates on Costco, Chipotle and Adding Altria Calls to the Mix
Key points inside this issue
- We are issuing a Sell and removing the Costco Wholesale (COST) January 2019 230.00 (COST190118C00230000) calls that finished at 19.90
- We are issuing a Buy on the Costco Wholesale (COST) January 2019 250.00 (COST190118C00250000) calls that closed last night at 8.20. As we make this trade, we will set a stop loss at 5.75 to limit our downside.
- We are boosting our stop loss to 29.00 from 19.00 for our the Chipotle Mexican Grill (CMG) January 2019 500 calls (CMG190118C005000000) that closed last night at 36.30, which is up more than 27% from our entry point last week.
- We are issuing a Buy on and adding the Altria (MO) January 2019 65.00 (MO190118C00065000) calls that closed last night 2.18 to the Select List, with an initial stop loss set at 1.00.
Booking a big win on Costco calls & adding a new One
We recently boosted our price target on the Costco Wholesale (COST) shares on the Tematica Select List to $250 from $230 following the company’s latest in a growing string of robust monthly same-store sales report. As I shared, these sales figures confirm Costco continues to win consumer wallet share as well as remains on target with its new warehouse openings. As you know I like to compare those monthly results to the monthly Retail Sales report, and we’ll get the August edition on Friday morning. I suspect it will confirm what we already know about Costco.
With COST shares gapping up over the last few weeks, we’ve seen an explosion in our Costco Wholesale (COST) January 2019 230.00 (COST190118C00230000) calls that finished at 19.90 when the stock market closed yesterday. That’s a gain of just over 200%, and as much as I like our position it wouldn’t be prudent if we didn’t convert some of those paper profits into real ones. Yet, I continue to see further upside ahead for Costco as we move into the shopping-heavy months to come in 2018.
So what we’re going to do is this:
- We are issuing a Sell and removing the Costco Wholesale (COST) January 2019 230.00 (COST190118C00230000) calls that finished at 19.90
- We are issuing a Buy on the Costco Wholesale (COST) January 2019 250.00 (COST190118C00250000) calls that closed last night at 8.20. As we make this trade, we will set a stop loss at 5.75 to limit our downside.
Boosting our stop loss on Chipotle Calls
That same August Retail Sales report that arrives on Friday will also give us a sense as to spending by consumers on restaurants, which means some indication on prospects for consumers eating at Chipotle Mexican Grill (CMG). I recently ate at one, and not only was it far cleaner than it has been in some time but the food was delicious and the service was prompt. Quite a change compared to earlier this year. I suspect I’m not the only one that has noticed some progress on the company’s “Big Fix” initiative under its new management team as CMG shares have been on an upward trajectory so far in September.
For the Chipotle Mexican Grill (CMG) January 2019 500 calls (CMG190118C005000000) we added last week, it means a positive move of just over 27%. As the company’s turnaround strategy continues to take hold, I continue to see more upside to be had in the underlying shares as well as the calls. That said, we still want to be prudent and that means boosting our stop loss to 29.00 from 19.00, which means worst case if we get stopped out we’ll be walking away with at least something of a profit.
- We are boosting our stop loss to 29.00 from 19.00 for our the Chipotle Mexican Grill (CMG) January 2019 500 calls (CMG190118C005000000) that closed last night at 36.30, which is up more than 27% from our entry point last week.
Adding a new call position on Altria shares
As part of our investment theme recasting over the last few weeks, we added shares of Big Tobacco company Altria (MO) and its impressive dividend yield to the fold. Since then, we’ve gotten some positive developments in that, as I suspected, Altria confirmed that it is examining the cannabis space, and the FDA announced a crackdown on e-cigarettes “if manufacturers do not control widespread teen use.” Both developments sent MO shares higher, but the threefold combination of potentially moving into the cannabis space, the recently boosted dividend and potential ban of e-cigarettes that would like goose demand for Altria’s tobacco-based smokeable products as well as smokeless ones are likely to drive MO shares even higher in the coming months, toward our $81 price target.
For that reason, I am adding the Altria (MO) January 2019 65.00 (MO190118C00065000) calls that closed last night 2.18 to the Select List. For now, we’ll set a wide berth with a 1.00 stop loss, and as MO shares and our calls move higher, we’ll step that stop loss up accordingly.
- We are issuing a Buy on and adding the Altria (MO) January 2019 65.00 (MO190118C00065000) calls that closed last night 2.18 to the Select List, with an initial stop loss set at 1.00.
