"Experienced traders control risk, inexperienced traders chase gains." -Alan Farley, The Master Swing Trader
Good morning. Today, I am looking at an Overnight Trade that I think can be very profitable come tomorrow. The market is in a pretty sad downward trend that hopefully can be broken tomorrow, so for now, we want to avoid Buy Picks straight up. Yesterday was a so-so day for us. Our Short Sale of the Day in Bristol-Myers Squibb Co. (BMY) worked out for about a 2% gain as we got involved at 24.35 and exited at 23.87. BMY appeared to be quite overweight at 8% gains on what was looking to be a down day, so we were able to ride its overvaluation. Our Buy Pick of the Day never gained any ground. We got involved with Southwest Airlines Co. (LUV) thinking that it would profit from some good news on profit expectations from the IATA and Southwest announcing it was seeing lots of turnaround in passenger rates. The stock slowly headed down the entire day. We got involved at 11.99 and exited at 11.66 for a little under a 3% loss.
Overnight Trade of the Day: Vail Resorts Inc. (MTN)
Analysis: If you are not familiar with Vail Resorts Inc. (MTN), they are a resort company that operate in the Rockies, Wyoming, California, and Nevada. The company operates five of the top ten most visited resorts in the USA. They focus on skiing and snow-sport themed resorts, and the company is set to report earnings tomorrow morning. They are slated to report earnings at an EPS of 1.83, which is significantly better than their 1.58 estimates from one year ago and beat of 1.65. I like this company because I think they represent a golden opportunity to beat estimates, have a nice future ahead, and are heavily oversold in the short term.
One of the main reasons that I like this company is that they have seen a significant rise in their revenues. The snow-sport industry has boomed in the 09-10 season due to the Winter Olympics as well as a recovering economy that has touched all
the lodging companies. Vail reported at the end of April that they had seen nearly every aspect of their business improve year-over-year. Skiiers were visiting more, buying more things, spending more on food and drink, and staying longer. The company reported that from January to mid-April had seen total skier visits up 2.3%, dining revenue up 2.5%, and retail revenue up 8.3%, as well as, increases in ski school and lift tickets. The company saw its best during Spring Break and Easter times. The entire industry has been doing quite well with snow sport gear up in the 09-10 season to $2.94 billion sold compared to $2.82 billion in 08-09 – an increase of 3%.
The entire lodging and resort industry has done exceptional. The two other main publicly traded resort companies in Wynn Resorts and Full House Resorts saw increases of 86% and 22%, respectively, in their latest quarters. In the Q2 2010 reporting season, 75% of all lodgings saw surprise increases with some of the major players seeing significant improvements: Hyatt at 110% surprise and Starwood at 550% surprise.
The numbers for Vail on revenue just do not add up to the current estimates. Currently, revenue is projected to be at $345 million for Vail, but that is only a 2% increase over last year’s Q2 when EPS was 1.65. As seen from the reports, many of the sectors are improving by over 2%. I think the revenue estimates are quite underestimated. Further, the company should be forecasting strongly. They have made plans to invest $75 – $85 million into improvements on their five main resorts .png)
over the coming months. This would suggest the company is returning to normalcy and sees more traffic on the way. Additionally, in the past quarter the company improved wages by 2% for their employees and returned a partial 401(k). All good signs…
Finally, MTN has recently become quite undervalued compared to where it was. The company has lost over 20% in its value over the past month. The stock has become very oversold and is nearing 25 on RSI, which is a level that is a technical dream because it means that the stock should pop at any time since that momentum is simply not sustainable on a fundamentally solid company. Vail represents a great opportunity moving into tomorrow. One that we should take advantage of for sure!
Entry: We are looking to enter Vail at 37.30 – 37.40.
Exit: We are looking to exit Vail tomorrow morning at open or if it gains 4% by the end of the day from entry.
Stop Loss: None
Good Investing,
David Ristau
