Lumber Liquidators (LL) – A massive turnaround play – The short dated calls will likely double after earnings.

by closethefuckinglight

Next week I will post another stock that I have been doing DD on for months. Click on my name and Follow to be first in line. Happy to hear you guys all made some tendies today. More to come autists.

Position Screenshot

Lumber Liquidators (LL) stock has been beaten down for years but the company is actually making a turnaround. They had issues in the past with product quality, but they have 420 stores across the USA. These stores are small (like 5000sq.ft) and they only have 2 employees per store, but the average store does $2.6 million in revenue per year. It’s one of the highest sales per sq.ft in all of retail.

Here is where it gets interesting. The stock used to trade at over $100, but has since fallen to $7. Housing and renovation stocks took a bath in 2018 and 2019, but in 2020 housing is staging a huge turnaround due to tight supply and low interest rates. The housing and renovation indexes ITB and XHB are now at all time highs. LL has been lagging, but the same store sales comps going forward are super easy because the company had a terrible 2019. They should be able to post comps in 2020 of 5%.

Also, the company will receive $25 million from the government because they overpaid on tariffs last year. They are literally getting a check from the gov for $25 million.

And in December, the company upped their guidance for 2019. And they will announce earning next week. This was their December press release.

I have 25,000 shares this morning and plan to buy more. I also have 140 calls for Jan 15, 2021. I really do believe in the company and I see it as a much safer bet than some of the tech stuff which it trading at massive valuations.

The best way to play this is with call options. The close term Feb 28, $8 calls are trading at $0.50. I think this stock will see a huge bump on earnings day (Feb 25) and these could easily be worth $2. (I plan to buy 100 of these calls).

Also, for a longer term play, the Jan 2021 $13 calls are trading at $0.60. I am thinking the stock should easily reach at least $15 by the end of the year, so these should be $2. It’s a triple and you have a whole year to get there. And if it can get to $20, (it was at $26 less than 2 years ago) you will more than 10x your money. (I have 140 of these calls).

ALSO The short interest in LL shares is almost 40%. When this stock starts running there will be an epic short squeeze, even worse than what happened with TSLA. It will go up by dollars at a time. And volume is pretty tight and just last week there were filings by Blackrock (owns 16%), Vanguard (owns 6.4%), Neil Gagnon (owns 4.8%) and T. ROWE PRICE (owns 5.7%). So, over 30% is owned by these 4 firms, plus in total almost 80% is owned by institutions. The 40% short interest will be difficult for shorts to unwind given the light volume. Any covering will send shares much higher on any good news.

Remember, LL shares doubled in 2 weeks last August when the founder tried to buy back the company – This thing has legs

 

Disclaimer: Consult your financial professional before making any investment decision.