Two Close for 3800% and 57%, While XPO Runs Out of Gas (XPO, KMB, ROL)

Posted on May 24, 2023

Tomorrow marks the holy, spring festival of Shavuot, and for that reason we’re coming at you early today—but with extra goodies: the first fruits, you might say.

We’ve got a winning pitch on the last mile truckers at XPO Inc. (NYSE:XPO).  But before we get there, we’re sure enough closing down two for a might bit of scratch—one for 3800%, the other for 57%.

And we do it using…

Imagine that: Cigars and Pharmaceuticals all-in-one.


Anyway, we kick off with our KMB trade that arrived in your inbox three weeks ago, on May 1st.  The letter was called Option Magic: Kimberley Clark Stands to Deliver 9900%, and it encouraged you to sell the KMB July 21st 145/150 CALL spread for $2.00 and buy the KMB July 21st 145/140 PUT spread for $2.05.  Total debit was $0.05.

And now: the CALL spread can be repurchased for $0.85 (1.15/0.30), while…

The PUT spread can be sold for $2.80 (7.50/4.70).

Get it done, and you walk with $1.90 NET on just $0.05 spent.

And that’s a strawberry-rhubarb 3800%.

In under a month!

N – E – X – T !

Our ROL trade was opened a mere nine days ago, but has moved in our direction magnificently since then.

The stock fell better than seven percent in just seven days.

And when it comes that fast, we don’t scoff.

The letter was called Rollins Brings the Roaches, and it urged you to sell the ROL November 17th 45/50 CALL spread for $1.30 and buy the ROL November 17th 45/35 PUT spread for $3.30.  Total debit was a round $2.00.

And now…?

The CALL spread can be bought back for $1.00 (1.15/0.15) and the PUT spread sold for $4.15.  That gives you $1.15 NET on $2.00 spent, and that’s a very nice 57%.

Should you decide to hold the trade for greater gains, best of luck.

Again, we’re acting because the profits arrived so quickly, and any retracement at this point could wipe out those gains.

OH, MY…!

Now, we turn to XPO, the international truckers of last resort, whose stock has had a field day of late.

It’s also offering us a wonderful potential payday of 3233%—if we get it right.

But first, the numbers.

Fundamentally speaking, the company is in trouble.

  • P/E is 29.85, but consensus is for that number to be halved to 15.43 a year out.  How does that happen?  Either earnings double or the stock is halved.  Take your pick.
  • There’s no dividend.
  • Price to Book is a fat-ankled 5.38, and…
  • Debt to Equity is bloated at 2.50.
  • According to analysts, EPS are expected to grow over the next year by just 2.00% (now you know how to choose with respect to Forward P/E, above), and…
  • EPS have FALLEN over the past five years by 12.90% on average, per annum.

Got it?

Now add the following to the mix: XPO just finalized a refinance of its large (and growing) debt to the tune of $2 billion.

And it don’t come cheap.

With rates a’rising, the company will be bleeding 6.25% annually on its “Secured Notes” and 7.125% per annum on its “Unsecured Notes”.

You Know it Don’t Come Easy…

Now the chart—

Many happy returns!

Matt McAbby


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