Trade Alert: An Under The Radar Manufacturer

While everyone's focused on AI, this company is quietly crushing it.

While Everyone’s Focusing On AI

In a way, this company is a picks & shovels play on AI, as it helps wire data centers. But it also serves industries from healthcare to green energy, to oil & gas companies. And judging by its financials, business is good. Some highlights (data via Chartmill):

• A current ratio of more than 10 (more than 10 times as much current assets on its balance sheet than current liabilities). This is better than 91% of the companies in its industry.

• A best-in-its-industry return on assets of over 32%.

• A Piotroski F-Score of 7 (recall scores of 8 to 9 indicate excellent financial health)

• An overall Chartmill fundamental rating of 8 (out of 10).

• A profitability rating of 10.

• An overall Chartmill technical rating of 8.

• A set-up rating of 8.

• Bullish options sentiment via Portfolio Armor.

The stock’s going up, the company’s making money, and our bet is it’s going to go up at least a few percent more over the next couple of months. If we’re right, we can more than double our money with this options trade on it.

Details below.

The company is Encore Wire (WIRE 0.00%↑) and the trade a vertical spread expiring on November 17th buying the $180 strike calls and selling the $185 strike calls for a net debit of $2.20. The max gain on 2 contracts is $560, the max loss is $440, and the break even is with WIRE trading at $182.20. This trade hasn’t filled yet. This trade filled today at a $2.20.

Exiting This Trade

For this trade, assuming it fills, I’m opening a Good ‘till Canceled limit order to close it at a net credit of about 90% of the spread (the difference between the strike prices of the two legs). Since that spread is $5 in this case ($180- $175), and 90% of $5 is $4.5, that’s where I’ll be placing my limit order to exit it. If that order doesn’t get filled over the next few weeks, I’ll lower the limit price as necessary as we get closer to expiration.