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Farm Fit and Ready to Flop (TSCO)

Posted on May 20, 2020

This week’s trade returns the goose to the larder.

We’re a commodities outfit again, friends, after several weeks of looking into the increasingly silly world of equity stock-pix.

But that doesn’t mean this week’s trade is a CME staple.

No-no!

Today, we’re all about agriculture and the effect the Wuhan Flu has had on preppers, farmers, weekend getaway hobbyists and full-on ranchers.

Wo-HO!

The company we’re looking at is Tractor Supply Company (NASDAQ:TSCO), operators of over 2000 “rural lifestyle” retail stores across the U.S. whose stock is up a saddle-humping 77% in the last 45 days.

The company was deemed an essential resource during the lockdown, as it provides a great many rural folk with feed, fertilizer, garden and livestock management and maintenance items, and saw a brisk business as city-slickers fled to the hills to escape the ghettoization of urban America through March and April.

Once a Star… Now a Rodeo Clown

Things have slowed somewhat.  And while the company was quick to offer a clever, same-day delivery service to satisfy the impulsive, wanton buying fever that the bat-bite caused, the stock also got a wee too hot during that time.

Not that a 77% move always has to be overdone.

But when it’s based on the gizmo-trickery of the corporate bosses, you gotta step back a few paces and pull out your Killamauron Archery Set (lubricants not included).

What kinda head-shaking shenanigans…?

A few things have to be sorted through here, but first some fundamentals.

TSCO trades with a P/E of 23, pays 1.28% annually and carries a P/B of 9.4.  Not great numbers, to be sure, but it was the next one that grabbed us –

Many happy returns,

Matt McAbby

4 responses to “Farm Fit and Ready to Flop (TSCO)”

  1. Bob Bell says:

    No thanks ,risk reward ratio similar to coin flip and the put liquidity is non existent.

  2. M T says:

    Just got the 115/120 and 97.5/90 for -.37

  3. Brad Brodie says:

    All my puts keep getting whacked in this insane bull market. S & P up nearly every day … again and again and again despite a pandemic (fading fast) and riots and 10% plus unemployment. Companies trading at insane multiples and no profits. I can’t make sense of it. You can’t fight the fed if there is a pullback they will buy even more ETF’s, corporate bonds, whatever. The parasite has to keep the host alive. Like you said, this ain’t the top. Really of late you can just buy call options on anything and they go up every day. Even with all the terrible news flow we have had … that is a bullish sign when nothing will make the market drop. When some good data finally shows the market will probably explode 10% higher. Hard to navigate because it makes little sense. It reminds me of the insane 1999/2000 tech bubble, but as I recall back then, the market cracked when the Fed starting raising rates. I recall from college that a P/E of 175 means that it would take the annual earnings of the company 175 years to add up to the market cap? Has that changed? haha. They won’t be raising rates for YEARS. Thanks for your hard work and like you said, what really matters is “what side of the trade you were on”.

  4. Matt McAbby says:

    Brother Bradley, the insanity is downright mystifying. Haven’t seen anything remotely close since the dot.com bubble, and believe this one will be even nuttier.
    Reality will eventually win, of course. But in the meantime, batten down the hatches and gird your loins.
    The storm’s only beginning to swell.
    May the Creator have mercy on all who are worthy.
    And may we all be counted among the worthy!
    It’s gonna get hairy.
    Keep in touch.
    Always good to hear from you,
    Matt McAbby

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