We hope you took advantage of last week’s trade, as C.H. Robinson Worldwide , Inc. (NASDAQ: CHRW) beat on both the top and bottom lines, and the stock popped about 5% last week. That should have given you around a 70%-75% return on the option today based on last Monday’s closing price. As they say, that’ll play.
Turning to the week ahead, the number of reports continues hot and heavy, although S&P 500 reports are on the decline after peaking last week. About 90 or so are expected this week, more than enough to choose from. Let’s take a closer look at Whole Foods Market , Inc. (NASDAQ: WFMI), which reports Tuesday after the close.
Analysts expect a healthy 48% bump in profits from a year ago. That may sound daunting, but it’s reasonable considering what WFMI has achieved for the past few quarters. What’s more, the company has a history of beating these estimates by a solid amount. Over the past six quarters, in fact, WFMI has beaten the consensus estimate by an average of 19%.
Being at the high-price end of the food chain was probably a less than ideal spot for WFMI during the economic downturn. But that appears to be turning around, as WFMI has posted solid increases in comparable-store sales and margins. As long as the economy is pointed higher, even if growth is slower than most want, WFMI should continue to see its numbers improve.
What we like most about this trade, though, is the low-expectation environment surrounding WFMI. Only 5 of 19 analysts rate WFMI a “buy,” and the put/call ratio is putting in a relatively high peak, meaning that pessimism among options traders may be turning around. That means buying should be close at hand. And short interest is also robust, so a short squeeze could help the stock should earnings impress.
WFMI’s chart shows encouraging signs, as well. The stock has been in rally mode for the past month, gaining ground in a series of higher highs and lows. Friday’s dip was supported by the 20-day moving average, and today’s early rally has the shares sitting atop their 50-day moving average, a trendline that is on the verge of pointing higher once again.
WFMI has a lot going for it, yet the Street seems overly cautious. That sets up a bullish play from our perspective. Buy the August 39 or 40 calls to take advantage of the move.
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