Taking a Position in AMN Healthcare (AHS) Calls

In yesterday’s Tematica Investing we shared our view of how the markets are entering one of the seasonally slowest times of the year, and that means being even more prudent than usual. We also welcomed AMN Healthcare (AHS) onto the Tematica Select List from the Contender list, given the sharp pullback in the shares over the last few weeks. As we mentioned, AHS shares are now in oversold territory even though data from the Bureau of Labor Statistics calls out the growing healthcare staffing shortage.

From a thematic investing perspective, we see the healthcare shortage as a very investible pain point, but we also see a compelling opportunity:

• We are adding the AMN Healthcare (AHS) October $45 calls (AHS161021C00045000) that closed last night at 0.13.
• In examining the calls, we’d note the wide bid-ask of 0.05-0.15, which has us holding back from implanting a protective stop loss at this time.
• On the upside, the calls are well off their 2.45 high over the last six months and we’d be content to buy them up to the 0.25 level.

Maintaining Our Buy on XLY Shares and Calls

Also in yesterday’s Tematica Investing we shared a rather deep dive on Back to School spending this year and how teens are a pronounced influence. If we look at many of those companies poised to benefit from that teen influence — Amazon (AMZN), Costco Wholesale (COST), Wal-Mart (WMT), Nike (NKE), American Eagle (AEO), Ralph Lauren (RL), Abercrombie & Fitch (ANF), Ulta Salon (ULTA), Guess (GES), VF Corp. (VFC), Starbucks (SBUX), Chipotle (CMG), Panera Bread (PNRA), Netflix (NFLX), McDonalds — we find many of them are top 10 holdings for the Consumer Discretionary SPDR (XLY) in which we have both shares and calls.

• With several weeks yet to go in BTS2016, we reiterate our buy rating on both XLY shares as well as the XLY September 2016 calls (XLY160916C00082000) that closed last night at 0.80.

After Taking Profits on Under Armour Calls we are keeping some skin in the game

Earlier this week, we took some Donald Trump yuuuuuge profits in the Under Armour (UA) January 20, 2016 $45 calls (UA170120C00040000) we added just a few weeks ago. In selling half the initial position, we netted an 80 percent return, but we kept half the position intact given what we see as further upside to be had.

On Tuesday, key Under Armour retail partner Dick’s Sporting Goods (DKS) reported quarterly results that were ahead of expectations on both the top and bottom line, with same-store comparison well ahead as well (+2.8% vs. guided -1% to +1%). Moreover, citing potential market share gains post recent competitor liquidations (The Sports Authority, Sports Chalet) as well as continued improvement in the company’s digital business and footwear makeover, Dick’s boosted its outlook for the coming year.

While much attention is paid to UA’s prospects outside of the US, share gains to be had by its largest customer provide an extra layer of comfort when assessing UA’s prospects for hitting its multi-year revenue target. The fact that Dick’s continues to invest in footwear, with more of its new full-service footwear decks being deployed with greater marketing efforts placed upon them at a time when UA is also attacking the footwear market with new models increases the odds of UA success in footwear.

Later this week, we’ll have earnings from both Hibbett Sports (HIBB) and Foot Locker (FL), which should offer additional bullish footwear commentary. We remain bullish on UA’s medium to longer-term prospects as it executes on its multi-pronged strategy, but we see these upcoming reports boosting UA shares in the short-term.

• We will continue to hold the remaining Under Armour (UA) January 20, 2016 $45 calls (UA170120C00040000). Our protective stop remains at 2.00.

Finally a bit of sour news.

On Tuesday, our United Parcel Service (UPS) September 2016 calls crossed our recently upped protective stop at 0.80. We boosted the stop to that level last week when we sold half of our position in the calls within 24 hours of adding them to the Tematica Pro Select List. While we never like to be stopped out, the second slug of UPS calls returned a 33% gain on top of the 50% return for the first batch. The silver lining is that blended return of more than 40% occurred in just 5 days.

Perspective is everything!