Extreme Trades for the Week of September 3, 2018September 4, 2018
Trade No. 1 — Goldcorp Inc. (NYSE:GG)
In its most recent quarter, GG missed on EPS and revenue. The miner posted a lower-than-expected adjusted quarterly profit as its gold production dropped and foreign exchange currency costs moved higher. It posted a net loss of $131 million, or 15 cents per share, compared with a net profit of $135 million, or 16 cents per share year over year. We should point out that there was a non-cash foreign exchange loss of 20 cents per share. So, the gold miner’s operating cash flow did remain stable.
While gold production was lower year over year, management expects to increase gold production in the second half of 2018 with its Éléonore mine in Quebec and Cerro Negro mine in Argentina. It also confirmed its 2018 guidance for gold production of about 2.5 million ounces at all-in sustaining costs of US$800 per ounce plus or minus 5%. Cost-reducing and production-improving initiatives have also been successful for the company.
Management also believes the company is on track to grow production by 20%, and reduce its all-in sustaining costs – a key industry benchmark — by 20%, by 2021. “With the ongoing successful ramp up of the Éléonore and Cerro Negro mines, on plan gold production across the portfolio and our pipeline of growth projects being advanced on budget and on schedule, we continue to execute on the delivery of our 20/20/20 plan of growing production and reducing AISC by 20% by 2021,” said David Garofalo, President and Chief Executive Officer of Goldcorp. “In addition, the strong exploration results achieved during the quarter, highlighted by the results at Musselwhite and Cerro Negro, demonstrate our exploration team’s ability to find new discoveries within Goldcorp’s highly prospective and underexplored land packages in order to achieve 20% reserve growth by 2021.”
In my opinion, GG is in a great position to do well with exposure to an oversold gold market.
There are two ways to trade GG at the moment. One, you can buy the stock at market prices. And, or two you can buy to open the GG January 18, 2019 11 calls, which last traded at 78 cents.
Trade No. 2 — OrganiGram Holdings (OTC:OGRMF)
OGRMF is another big way to trade the marijuana boom.
Another reason to like OGRMF is its agreement with Nova Scotia Liquor Corporation.
“We are pleased to announce our supply agreement with NSLC,” says Greg Engel, Organigram’s CEO. “Our home markets have always been a key priority for Organigram and this announcement solidifies our position as the market leader here in the Maritimes. With supply arrangements in place in six provinces, we take great pride in our place as a national leader working towards a sustainable and successful adult-use recreational cannabis market.”
Fundamentally, there’s plenty of opportunity. It posted record net sales for both the three-months and nine-months ended May 31, 2018 of $3.7 million and $10.1 million respectively vs. $1.9 million and $3.6 million respectively for 2017. A net income of $2.8 million was an increase of 162% compared to $1.1 million in Q2-2018 and a loss of $2.3 million in Q3-2017.
Technically, the stock just broke above triple top resistance dating back to January 2018. At this pace, given sizable catalysts with Canadian legalization and corporate interest, we’d like to see stock at least double short-term.
Buy OGRMF at market prices.
Trade No. 3 — Newell Brands (NYSE:NWL)
One of my favorite ways to make money is by buying badly damaged stocks that are down temporarily. Newell is a great example. All thanks to continued weak numbers. The company posted $2.2 billion in sales from continuing operations, which was down 13% year over year. EPS fell 41% to 27 cents. Operating cash flows fell year over year to $11.2 million. It then lowered earnings guidance for the fourth time in a year.
But it appears insiders believe it’s oversold at a six-year low. In fact, five insiders bought $4.3 million worth of shares over the last two weeks. One reason for that may be its plan to right the ship after announcing plans to “generate $10 billion in after-tax proceeds” from a combination of asset sales and cost cuts. It wants to use that cash to buy back more than 40% of its outstanding shares by 2020.
Technically, it’s beginning to pivot well off recent lows.
There are two ways to trade NWL. One is to buy the NWL stock at market prices. The other is to buy to open the NWL December 21, 2018 22 calls, which last traded at $1.58.