Trade of the Day: Tiffany & Co. (TIF)

We expect Q1 earnings to make this jeweler a trader's best friend

By John Jagerson and Wade Hansen, Editors, Strategic Trader

Turn on the news these days, and you don’t have to wait long to hear some mention of the growing divide between the rich and the poor in the United States and elsewhere around the world, from China to Russia and from Europe to India. Just last week, Fed Chair Janet Yellen called it a “very disturbing trend,” though she side-stepped questions about the Fed’s own potential contribution to the problem of keeping interest rates low.

The fact that an economics book titled “Capital in the Twenty-First Century” from a French economist named Thomas Piketty decrying the widening wealth gap has made it to #4 on the New York Times Hardcover Nonfiction list tells us that this is a topic on a lot of people’s minds. Now, whether or not you subscribe to Piketty’s thesis or his proposed solutions, there is no doubt that the rich are getting richer. And who is that good for? Tiffany & Co. (TIF).

TIF caters to the upper echelon of the socioeconomic scale, and it has been doing a marvelous job. Just looking at a longer-term chart of TIF tells you that the upper class’s penchant for the finer things in life is alive and well. Recently, TIF pulled back to its longer-term up-trending support level at $85 and is now on the cusp of breaking out of a strong rounded-bottom formation.

We anticipate that TIF’s upcoming earnings announcement on Wed., May 21 (before the market opens) is going to be just the thing to send TIF higher. Analysts at Bank of America (BAC) seem to agree; on May 8, they upgraded TIF from a “neutral” to a “buy” rating with a $100 price target, saying that they expect “continued margin expansion from a favorable commodity cost environment and higher selling prices.”

TIF pulled back after its most recent earnings announcement when it announced a one-time pretax charge of $473 million related to an arbitration case it lost to Swatch, but that is behind us. TIF continues to see strong growth across the globe, and we expect that to continue in the future.

We’re looking for an earnings announcement this go-around that looks more like the November 2013 announcement than the March 2014 announcement. So for traders looking to take advantage of it, our recommendation is to buy to open the TIF June 92.50 Calls (TIF140621C00092500) for a maximum price of $1.80.

InvestorPlace advisors John Jagerson and S. Wade Hansen are co-founders of, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.  Get in on the next trade and get 1 free month today by clicking here.

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