Tasty, Yes—But OH! My Dentures! (TR, AEO)

We’ve got a glorious one today for you to chew on, but first, a little squiggle of a trade enhancement on our open AEO initiative.

And it goes like this…

We’re currently holding one lot of AEO and an open, short February 17^th 15 CALL.

With our breakeven at $14.95, and AEO jumping by 22% in the last two sessions to sit at $15.80, we’re now recommending the following—

Buy back the short 15 CALL for $2.14 and sell the May 19^th 15 CALL for $2.80, thereby reducing our breakeven on the trade to just $14.29 and setting us up for much bigger profits.

By the by, we’ve also collected a dividend (in June), but haven’t factored that into our winnings.

Stay tuned…

And now we address that age-old riddle—how many licks does it take to get to the Tootsie Roll center of a Tootsie Pop…?

Who are They?

Tootsie Roll Industries Inc. (NYSE:TR) poisons your children with the following innocuously named toxins: Tootsie Roll, Tootsie Pops, Child’s Play, Blow-Pop, Charms, Junior Mints, Sugar Babies, Dubble Bubble and other such nonsense.

And lately, they’ve done a number on investors, too, tricking them into believing that a 38% rise in the stock price over six weeks is perfectly acceptable.

But we’re not fooled.

Because we know that a legacy candy manufacturer shouldn’t have the following fundamentals…

• P/E is a gob-smacking 41.91, while Forward P/E is non-existent.  Why?  Analysts expect a loss twelve months from now.
• Dividend is a candy-wrapper 0.83%, and…
• Price to Book is overweight at 3.80.
• The only thing that should scare us is the fact that the company is 35.29% held by insiders.  And insiders like a rising stock.

That said, there’s a limit to all things criminal, too.

This is the chart –

We stress that an early turnaround on the trade is likely, so keep your finger on the trigger.

PRAISE THE LORD AND PASS THE AMMO!

The G-d of Israel will see us through.

Many happy returns!

Matt McAbby

Follow @HughLOHaynew