Any company with a stake in international shipping has gotten pummeled this month – and rightly so.
Despite claims that retail will see an incredible holiday season full of sales, it has become increasingly clear to us investors that demand has outpaced supply for almost every product on the market. Shelves are clearing out and wishful thinking isn’t going to move products from ports and warehouses to the sales floor any faster.
Which is why I’m watching companies that are doing more than just sit, wait, and hope. Companies that are planning strategically for the long-term to lock in profits for themselves and their shareholders.
I have a list of four of these companies, the first of which is the social media company famous for creating Snapchat.
Snap Inc (NYSE: SNAP) had its shares clobbered during Friday’s session, dropping more than 22% after the company reported less quarterly revenue than expected and grime forward guidance. The key issue that appeared to trigger the sell-off was changes made to Apple’s privacy settings that could hinder SNAP’s future revenue. There are also rising concerns that supply chain issues will affect the efficiency of advertising on the platform.
But a 22% drop just for that? It seems excessive considering Snapchat is one of the most popular social media platforms among young people, teens especially. SNAP has a huge demographic of highly engaged users that will continue to use the platform regardless of global supply chain issues. That translates to plenty of profit opportunities for the company.
I think we’re going to see several analysts come out in favor of SNAP as a long-term play which could drive share values higher – even if it’s only for a brief moment.
In my eyes, that’s an opportunity for a quick triple-digit profit if you grab the SNAP November 12, 2021 $61/$62 Call Spread for $0.50 or less.
Plan on exiting this position for a 100% profit or if SNAP trades down to $56.50.
Although… Speaking on the supply chain, shares of Intel Corp (Nasdaq: INTC) dropped more than 11% early on Friday after the company released its third-quarter financials. While, paradoxically, the company beat revenue estimates by $10 billion, its profit margins are down – making some investors skittish.
But that’s a mistake you don’t want to make. INTC is in the midst of a turnaround designed to bring semiconductor manufacturing back to the US. That’s a strategically critical decision considering the huge disruption we in the US, and others throughout the world, are experiencing with Asian manufactured chips.
In order to finance the project, margins are down 10%, but we are back up to INTC’s average range of 60%-65% in two years.
This is a long-term strategy that will pay off for INTC and prove very profitable for investors that can see past the next couple of years of smaller margins.
Before that can happen, though, I think we could see shares come down further to the $46-$47 range before breaking higher.
So, if shares of INTC close below $46.50, let’s buy the INTC March 18, 2022 $52.5/$55 Call Spread for $0.75 or less. Plan on exiting this position for a 150% profit.
But before you go, I have a bonus play for you.
I’m also watching Cleveland-Cliffs Inc (NYSE: CLF). Shares of these North American flat-rolled steel producers jumped more than 10% during the same trading session that took just as much from INTC and SNAP.
Its third-quarter results saw a revenue surge of 265% over the last year, which was driven by a series of strategic acquisitions of ArcelorMittal‘s US operations and AK Steel. Since then, its seen revenue jump from $2 billion in 2019 to an expected revenue of $21 billion by the end of this year.
Those are great numbers, but what really caught my attention from the earnings conference call was the company’s ability to successfully negotiate annual fixed-price sales contracts with some of its most important customers. CEO Lourenco Goncalves explained that the company’s “average sales price next year should be higher than in 2021, allowing us to continue to grow our already strong profitability and to further strengthen our balance sheet”.
I like all of that, but I’m concerned that Friday’s move could be too much, too fast. I’m looking for shares to come back down to $22.80 (which would fill some of Friday’s gap up) before establishing a position.
If shares of CLF come back down to $22.80 by November 5, 2021, I like buying the CLF December 17, 2021 $24/$25 Call Spread for $0.45 or less.
Plan on capturing a 100% profit on this position or exit the trade if CLF breaks down and closes below $20.75.
Until then…
Cheers,
— Shah
Source: Total Wealth