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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 104

This stock has always had a great story—the company looks like one of the best cookie-cutter stories in construction-related retail, operating large (75,000 square feet on average) warehouse-style locations that specialize in hard flooring (tile, wood, stone, laminate and the like).

Cabot Profit Booster 104

The Stock – Floor & Décor (FND)

Floor & Décor has always had a great story—the company looks like one of the best cookie-cutter stories in construction-related retail, operating large (75,000 square feet on average) warehouse-style locations that specialize in hard flooring (tile, wood, stone, laminate and the like).

The firm has been growing for years, thanks in part to a rapid store expansion plan (about 20% annually), but the on-again, off-again housing market has crimped perception. Now, though, with signs that the economy and housing are set to pick up steam in 2020, analysts see bottom-line earnings growth accelerating next year (up 22%) and the stock is setting up a nice launching pad. But what we like is that this isn’t just a cyclical play—longer-term, management believes there’s potential for 400 stores in the U.S. (up from 113 at the end of September), and continued rapid store growth along with healthy same-store sales (up 4.6% in Q3) means there’s the potential for many years of solid earnings expansion.

Technical Analysis

fnd

FND peaked back in April 2018 and imploded into year-end before rallying with the market. Since then, it’s etched two bases—the first (April through August) looked OK, but the breakout failed as the market wobbled. But the current launching pad looks tasty, with some bullish clues (two biggest volume weeks were up; six weeks up in a row) and a little tightness recently. You could nibble here and look to buy more on a decisive push above 53, or just wait for the breakout before entering. Stop – 45.5

The Covered Call Trade

Buy Floor & Décor (FND) Stock at 50.50, Sell February 52.5 Calls (exp. 2/21/2020) for $2.45, or a Net Price of 48.05 or less

Static Return: $245 per covered call (5.09%)

Breakeven: 48.05

Covered Call Return (if assigned): $445 per covered call (9.26%)

Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.

However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 48.05 or less. (In this case 50.5 minus 2.45 = 48.05. Or another example is you could pay 50.25 for the stock and sell the call for 2.20, which also equals 48.05)

For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

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