בס״ד

Champagne, Slaves and Adderall (MC)

Posted on September 15, 2019

A fresh September morning to you all!

Today we look at a lesser known, New York based investment bank, whose biggest deals may be ready to hatch in the months ahead.

The firm is Moelis & Co. (NYSE:MC), a $2 billion outfit by market cap whose stock has languished for the last year and got more publicity for its pharaonic management team and outrageous 85 hour work week than for the deals it managed to patch together before or since.

And while it’s not our business to judge the youthful junior partners of any maniacally profit-mad business, we would encourage those still in the office at 3 a.m. on a regular basis to lay off the cocaine and Adderall and stick to a cheaper substitute, like Elmer’s glue.

The Pipeline Bulges

That aside, Moelis’ profile – and stock price – could be in for a boost, as they take the lead on an upcoming buyout of the London Stock Exchange and make a second go of the Saudi ARAMCO IPO.

Nothing’s a sure bet, but with the stock 50% off its highs, the fundamentals AND technicals beckoning – along with the possibility of some sizzle from the current star-studded deal flow – Moelis could be ready for a pop.

 

Let’s start with the fundamental picture.

  1. Moelis trades with a trailing P/E of 16.4,
  2. It carries an annual yield of 5.8% (!), and P/B of 4.7.
  3. It’s 93% institutionally owned and has scant coverage on Wall Street.

On the whole, that’s nothing that should terrify an investor looking to take a long position.

Technically, though, the outlook is even brighter.

Have a look at the daily chart –

The technical lowdown’s like this –

  • First, positive divergence from RSI and MACD bode well for the stock (in green). As the shares made lower lows, RSI and MACD turned higher, showing selling momentum was waning.
  • Both RSI and MACD are now surfacing above their respective waterlines (green boxes) – another positive development, even as
  • Price cracks above a long term down-sloping trendline (circled, in black).
  • And all this after the $32 support line (in blue) held on three separate occasions over the last nine months.

We would add that the break higher also occurs after all the salient moving averages have unfurled and are trending lower, a prerequisite in our playbook for any advance to commence.

How high could she fly?

Initially, we see Moelis moving toward the $42 level as the two above named deals start to garner more media attention and Wall Street turns a spotlight on the company – and her dividend, in particular.

And with that in mind, we’ve structured the following trade –

A Jew and His Money recommends you consider selling the MC April 17th 35 PUT for $3.40 and buying the MC April 17th 30 PUT for $2.20, for a credit of $1.20.  Use those same funds to purchase the April 17th 40 CALL for $1.75.  Total debit on the affair is $0.55.

With kind regards,

Hugh L. O’Haynew

 

Leave a Reply

Your email address will not be published.