You can see it on the tape printing minute by minute, a battle or terrific struggle among three entities trying to buy a very thin supply of JACK shares. The first entity is the company which is committed to buy, this year, that original $97,000,000 of stock as authorized by the board. Secondly, there is a pretty good contingent of shorts remaining and sweating it out day by day. Third, we have that new fairly significant number speculators who are focused on the CKE Restaurants buyout offer, extrapolating to the JACK dynamics. JACK at 22.00 still sells for less than 11X the estimate for calendar 2010. The PEG is also ridiculously low given the 5 year projected earnings growth rate for JACK. The tension is building in here as one can clearly see the potential for JACK in the 25-26 area probably over the next three or four months. I look for a sweetener in the CKR deal if not a new buyer coming into the picture.This also enhances the impression of JACK's value. And, of course, Qdoba is something very few of the traders or speculators ever heard of. This wholly owned JACK subsidary is a near clone of Chipotle, one of their favorite stocks. This company will be spunoff eventually to the benefit of JACK holders. This alone is enough to excite many of these swing type investors, in addition to the new buzz surround JACK and the fact it still sells the cheapest in the group, that is, among companies with decent enough balance sheets.
All the best, Big J in L.A.
I picked up an Options book from the L.A. library yesterday. Hopefully it answers all of my Options questions and makes me a better trader! Thanks for all of your info. Hope your investments are going well Big J.
It definitely looks like JACK has some legs. Someone might be trying to stop the momentum though. The March '10 options are getting heavy on the put side. Maybe someone wants in and wants to put a little selling pressure on the stock to shake some weak hands and pickup some shares?
It is more likely someone sold the puts to gain a premium short term. I use this strategy myself but this was not a transaction of mine. Buying puts on this stock is not a wise course of action. The person who did that into the earnings report, selling the 20 puts, actually lost money. Everyone was praising him for anticipating the slightly lower earnings result; but that is pure bunk. The guy knew nothing significant with only that slight miss. No, what we are seeing now is definite accumulation after the CKE Restaurants deal. Bottom line of course is that JACK is one heck of a value and now everybody knows it. Many are probably waiting for a selloff to get in on a good situation. best, Big J