The Quick Consumer – IN AND OUT; NO ONE GETS HURT. (SYY)

In today’s dispatch, we follow in the path of Osaka Mayor Ichiro Matsui, who two years ago complained that Japanese women take too long to purchase the groceries.

“If it was you, if you were told to get this or that, then you would go directly… and go home,” he said.  “When a woman goes… it will take time…”

Not wanting to upset the lord mayor – or to suggest that we’re effete by nature – we’re leaving the car running and popping in and out like a proper thief for today’s trade.

HOWZAT?!

The trade has a short-term time horizon, is what we mean.  We have to see action in a hurry to make our money.  And that means it’s SPECULATIVE.

That said, we’ve structured it such that we’re already in-the-money by $0.74 from the get-go, AND we stand to pull in a full 1233% if we’re right.

Now let’s have a closer look.

The company in question is SYSCO Corp. (NYSE:SYY), suppliers of food and “food-related products” to hospitals, colleges, hotels and other industrial-sized kitchens.

Now, as inflation takes hold and food items cost more, one would think this would be a doozy of a stock to own.

But the truth is otherwise.

The company missed earnings expectations a month ago on higher operating expenses and less than favorable business conditions arising from the BATFLU nonsense.  But it did add to its business portfolio with the acquisition of produce distributor The Coastal Companies.

That won’t be enough, though.

There’s a coming fire that’ll have to be extinguished first.

Have a look at the fundamentals –

• First, P/E is a fat 55.75, a number disconnected from both current and projected earnings.
• Dividend Yield is 2.21% – nothing wrong with that, but
• Price to Book is an unholy piggish 35.55 (!), and
• Debt to Equity is 9.08!
• And if that weren’t bad enough, insiders sold off 27.61% of their stock in the last half year.

These are not the numbers you want to see before buying.

Now look at the chart –

The technical breakdown’s like this –

1. RSI is a day from breaking below its midway waterline, and
2. MACD is rolling over (both in green).  Taken together, they provide the basis for a surge of selling once it’s clear both are trending lower.
3. A significant break below the rising wedge (in red) occurred last Friday.  That’s a sign the latest rise has terminated and the bears are assuming control (in blue).
4. After a three month, 30 percent rise, a break is in order.  We expect price to veer toward first support at the bunched moving averages at 79 (in purple).

But we don’t need all that to cash in.

Just this –

A Jew and His Money recommends you consider selling the SYY March 18^th 84/89 CALL spread* for a credit of $2.05 (2.90/0.85) and buying the SYY March 18^th 88/84 PUT spread** for $2.35 (4.30/1.95).  Total debit on the trade is $0.30.

[*Sell the 84 CALL and buy the 89 CALL.  **Buy the 88 PUT and sell the 84 PUT.]

Rationale: we like the takeaway here – $3.70 max on just $0.30 expended, or 1233%.

Max loss is $5.30 (difference between the CALL strikes plus the initial debit).  That loss would occur if SYY jumps higher to close at a new all-time high, an eventuality we balk at.

The trade is already in-the-money by $0.74, meaning we have room to play on the upside before any loss ensues.

And full profits are taken with a decline of just 1.1%.

And that’s awesome.

Let it be His will that the evil ones bury one another while the good souls – all you Holy Jews and Noahides – look on from the safety of his Holy Abode.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew