Re-Tooling For a BULLISH Blowout (SWK)

Fans of this letter know that we’ve had a bearish tilt for a good long time.

And we’ve made a lot of cash playing the downside.

But if you’ve paid close attention, you’ll also notice that of late we’ve been setting up a few bullish initiatives to take advantage of what we see as a potential eruption to the upside.

And today we continue in that vein, with a trade that employs Stanley Black & Decker Inc. (NYSE:SWK), a stock that can’t get a break no matter what it says or does for nearly a year and a half now.

The stock got drilled, hammered and screwed all the way from $225 to $70 over that period, and market watchers appear to have given up on any sort of turnaround.

BUT NOT US!

Consider SWK’s fundamentals –

• First, P/E is a very competitive 13.87,
• Dividend Yield is substantial at 4.04%,
• And Price to Book is just 1.36.  All told, a healthy picture.
• Beyond that, EPS are up this year 34.40% over last year’s numbers, and
• Analysts are expecting a further rise of 19.16% over the next twelve months.
• We would only add that insiders have been net BUYERS of company stock over the last half year, adding $4 million to their existing positions in August and September, representing an 18.24% rise in their overall holdings.

And that, too, builds confidence.

SWK reports earnings TODAY, forecasting in advance that they expect a decline.  More important, however, is whether the real numbers beat estimates.

Our take is that they will.

Inflation has taken its toll on the company’s sales, true — but tools never go out of fashion, and are far less discretionary than other retail items.  And Stanley/Black & Decker are industry leaders.

We’re looking for substantive action from the get-go today.

Now look at the chart.

We’re featuring just the weekly today, because that’s where the beef is —

May the Lord, G-d of Israel watch over us and deliver us only positive outcomes.

Many happy returns!

Matt McAbby

Follow @HughLOHaynew