WEEKLY ISSUE: Covering Facebook and Deploying into New Call Position
KEY POINTS FROM THIS ISSUE:
- We are closing out the short position in Facebook (FB) shares on the Tematica Options+ Select List.
- We will use a portion of the returned capital to scale into our MoneyOnMobile (MOMTD) position, which at current levels will improve our cost basis.
- We continue to have our short positions for both Target (TGT) and Funko (FNKO) shares.
- We are adding the Wayfair (W) June 80 calls (W180615C00080000) that closed last night at 2.20. As we do this, we’ll set a stop loss at 1.10 to limit downside risk. On the buying front, subscribers should look to scoop up these calls below 2.20 and up to 2.85.
This week I’m introducing a new position for the Tematica Options+ Select List, but before I do so we are going to cover the short position in Facebook (FB) shares, which will generate a modest loss of just under 7%. With the company’s quarterly results now in the rearview mirror that showed little impact over the recent privacy and usage concerns, and an upbeat F8 meeting this week (Facebook’s equivalent of Apple’s annual WWDC event), closing the short in the shares is the prudent move.
We’ll use a portion of those proceeds to scale into MoneyOnMobile (MOMTD) shares, which are down some 40% from our initial buy even though the fundamentals and thesis surrounding the underbanked in India remain. We’ll also continue to keep our short positions on Target (TGT) and Funko (FNKO) intact.
Quickly with Funko, not only has the recent upward move in the share price led to the shares being overbought, but it looks very much like that upward move is being fueled by rising short interest in the shares. That means more investors are recognizing what we have – the combination of pain to be had from the Toys R Us bankruptcy and liquidation are poised to hit the company’s business.
- We are closing out the short position in Facebook (FB) shares on the Tematica Options+ Select List.
- We will use a portion of the returned capital to scale into our MoneyOnMobile (MOMTD) position, which at current levels will improve our cost basis.
- We continue to have our short positions for both Target (TGT) and Funko (FNKO) shares.
Adding a new call option position in Wayfair
When the majority of consumer think of the digital commerce aspect of our Connected Society investing theme, likely more than not they think of Amazon. Given the success Amazon has had, and I think it will continue to have who can blame them? There are, however, other companies that are tapping into the accelerating shift in consumer shopping toward digital commerce.
One example is Costco Wholesale (COST) and another is Walmart (WMT), but one that receives far less fan-fair and has a far greater business exposure to digital commerce is Wayfair (W). For those unfamiliar with Wayfair, this e-commerce company offers approximately 10 million products for the home sector under various brands. It offers a selection of furniture, décor, decorative accents, housewares, seasonal décor, and other home goods through its sites, that include such as Wayfair, Joss & Main, AllModern, DwellStudio, Perigold, and Birch Lane.
When Wayfair reported its March quarter results this week it showcased a 33% year over year increase in active customers to 11.8 million and a 48% increase in direct retail revenue, which represents 99% of its revenue stream. The company also reported a nice year over year increase in its average orders size to $236 from $223 a year ago. And here’s the statistic that really jumped out at me — repeat customers placed 64.3% of total orders in 1Q 2018, compared to 60.4% in 1Q 2017. Put it all together and this tells us that even as the company is winning new customers, repeat customers are ordering more products across Wayfair’s various consumer facing web properties. To me, that sounds a lot like Amazon and its users.
These metrics led Bank of America Merrill Lynch to up its price target on Wayfair shares to $95 from $90, offering 28% upside from current levels. While we could add the share as a long position, and I may make that recommendation in Tematica Investing in the coming weeks, the June 80 calls offer far better upside and a far smaller capital outlay. As we add the Wayfair (W) June 80 calls (W180615C00080000) that closed last night at 2.20, we’ll set a stop loss at 1.10 to limit downside risk. On the buying front, subscribers should look to scoop up these calls below 2.20 and up to 2.85.
- We are adding the Wayfair (W) June 80 calls (W180615C00080000) that closed last night at 2.20. As we do this, we’ll set a stop loss at 1.10 to limit downside risk. On the buying front, subscribers should look to scoop up these calls below 2.20 and up to 2.85.
