What a week we had last week. A lot of good things were happening, and we ended the week very positively with a Short Sale in TIBX that was good for a 2.5% gain. This week, we will continue to try to keep the good times rolling. We start out today with a new Short Sale position. Additionally, we will be looking at a new Play of the Week, and I will be publishing my Longterm Rating on Frontier Communications (FTR).
Let’s get into today’s first play…
Buy Pick of the Day: Airtran Holdings Inc. (AAI)
Analysis: Typically, I am not too excited to enter a stock that has gained 60% overnight or over the weekend, but today is a special case. Airtran Holdings was purchased by Southwest Airlines for $1.25 billion. The company will add the value airline to its growing fleet. The attractive aspect of the deal to me is that the company is bought at a value of $7.69 per share.
In pre-market, the stock is trading at $7.30 per share, and it should move up to $7.69. That is a 7% difference that should be closed in today’s market. Typically, stocks often move above where they are supposed to be valued in deals for being bought out because everyone wants to get into a bought out company as it moves towards the purchase value.
Airtran was attractive to Southwest because of the company’s large traffic flow through Atlanta, which is the busiest airport in the country. The company had very limited access to the airport but will now be able to take advantage of this airport with its latest deal. The deal will also allow for the company to expand itself at Boston Logan and New York’s LaGuardia.
We want to enter this stock right at the open today. You might be thinking why not Short Sale thisk stock since it has grown so much, but the thing is that the supply for selling is going to be very low. Investors are going to wait to sell this until it hits its target price or not at all. We want to take advantage of the movement the stock should have as it approaches $7.69.
Get in early and wait for a big move.
Entry: We are looking to enter right at the open of the market.
Exit: We are looking to exit for a 2-4% gain.
Stop Loss: 4% on bottom.
Good Investing,
David Ristau
