Below is a market neutral trade I opened Tuesday morning, but first I wanted to thank those of you who have downloaded and rated the Portfolio Armor iOS app. When I checked AppShopper.com at the end of last week, I saw the screen cap below, which showed that, among the top 200 paid finance iOS apps, Portfolio Armor had the highest customer rating. Thanks again for that.
Also, quick follow up on my last post ("Speculative Options Buy Update"): In that post, I mentioned that COHR would be releasing its Q after the close Tuesday. It reported EPS and revenues that beat estimates( EPS of $0.83 vs. estimate of $0.78; revenues of $200.9M vs. estimate of $192.68M), so we got a little lucky there. The underlying is up about 3% afterhours as I type this, reversing today's decline, but we'll see how this pans out going forward. On to Tuesday's market neutral pair.
On Tuesday morning, I shorted USG at $15.09 and bought an equivalent dollar amount of IFSIA at $18.55. I e-mailed the trade idea to those on the market neutral trade notification list before market hours Tuesday.
USG Corporation (NYSE: USG) manufactures Sheetrock and other times of wallboard. I shorted this one last year, and got stopped out for a single-digit loss. I plan on using a double-digit trailing stop this time, on both the long and short side of this trade. I’ll probably use slightly tighter stops initially this time than I did initially on the last market neutral trade (long IMO, short TRGL) though. Charts below courtesy of Finviz.com.
Short Screen shows an Altman Z-Score of 0.59 for USG. Scores below 1.81 are considered an indication of financial distress, according to the model.
USG is currently rated as having Average Accounting & Governance Risk (AGR®), receiving an AGR Score of 70 percentile among the approximately 8,000 companies in North America rated by Audit Integrity, indicating higher accounting and governance risk than 30% of the other companies.
USG had negative earnings over the trailing twelve months and has an PEG ratio of -0.19 (based on analysts’ estimates of its earnings over the next five years).
Interface, Inc. (NASDAQ: IFSIA) manufactures modular and broadloom carpets, and other floor covering products.
IFSIA has an Altman Z-Score of 3.37. Scores above 3 are considered indications of financial strength.
IFSIA is currently rated as having Conservative Accounting & Governance Risk (AGR®), receiving an AGR Score of 98 percentile among the approximately 8,000 companies in North America rated by Audit Integrity, indicating higher accounting and governance risk than 2% of the other companies.
IFSIA looks pricey based on trailing earnings, but it has a PEG ratio of 1.44 (based on analysts’ estimates of its earnings over the next five years), which looks a little more reasonable.