בס״ד

We Close for a 3600% Gain in One Flippin’ Week! – and Open Afresh on the Utility Front (UGI, XLU, TRN)

Posted on April 6, 2022

With glory to the G-d of Israel, we’re gracing your inbox a day early this week – again to avail ourselves of a dynamite offering from the land of the Utilities.

But first, we take a trip to the bank.

The above mentioned closure relates to our March 31st missive, entitled False Gods Railroaded! Trinity Tumbles!  There, you’ll recall, we urged you to sell the TRN May 20th 32/37 CALL spread for a credit of $2.30 and buy the TRN May 20th 35 PUT for $2.35.  Total debit on the affair was $0.05.

And now we’re pleased to report that the CALL spread can be repurchased for $1.75 (2.05/0.30), while the PUT can be sold for $3.60.

Execute on both and you walk with $1.80 NET on a nickel expended.

And that’s a cool 3600%.

Strike up the rebel songs!

Now we move to this week’s endeavor – a play on the utility sector that we believe could produce another hum-dinger win.  That trade’s been calibrated with unlimited profit potential, a sizable opening credit and possesses a defined, modest downside if we’re wrong.

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It’s based on Pennsylvania’s UGI Corporation (NYSE:UGI), provider of energy to the people of that state’s central and eastern regions.

The thing with UGI is it’s been acting like Wrong-Way Corrigan of late, dropping in price even as the rest of the utilities were soaring.

How to explain it…?

Managerial incompetence?

Domestic terror?

Saturn square Venus?

The only reason we care to posit is the teleological one: that we might avail ourselves of tremendous winnings via a clever selection of her options.

Fundamentally, we’re dealing with a very cheap stock –

  • P/E is 7.44,
  • Dividend Yield is 3.80,
  • Price to Book is just 1.48,
  • The company grew earnings by 26.80% per year for the last five years, and
  • Are expected to grow them by a further 16.01% next year, according to consensus.
  • And finally, insiders began BUYING shares in late February – the first purchases of the stock in a year. Total value of those purchases was $2.5 million.

Have a look now at the chart –

May we always find favor in the eyes of the Al-mighty.

Many happy returns!

Matt McAbby

 

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