In Depth Analysis of a Small Cap Stock Term Paper

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BETR

With the health food trend in full gear, Amplify Snack Brands, Inc. (BETR) is a perfect stock for one's portfolio. Q1 2016 Earnings showed a "net income increased 71.3% to $8.4 million, or $0.11 per share, compared to $4.9 million, or $0.07 per share a year ago" ("Earnings Reported After the Bell May 2"). Sales were up over 20% compared to the same quarter the year previous and the company slightly beat analysts' expectations. Growth for the company looks positive with analysts expecting yearly revenues to report a "net income of $.062 per share" ("Earnings Reported After the Bell May 2").

Thus, from January to May 2016, BETR has been on a tear, breaking out of its range bound trading from January to March after the 2015 earnings report. The stock soared from $11 to $16 from mid-March to May with considerable volume buoying the stock over the 2 and a half month period as can be seen from the chart in Fig. 1.

A more macro look at the chart going back to the company's IPO in August of 2015, shows that the stock price opened at $17 and was hammered down to $10 by October. Technicals indicated that it was quickly oversold but lackluster volume kept it from breaking resistance points at $12.50 and after a couple months of trading sideways around $12, the stock sold off again, crashing to new lows at just over $9 in early January 2016. Since then volume began to increase as shorts no doubt began to cover.

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The stock rose to $11.50 then was sold off again before recovering nicely by the end of March. Thus, the stock was primed and ready to run and with a good earnings report that beat analysts' expectations, that is exactly what the stock did.

Over the past month, the stock has appeared overbought, and a dip from $16 to $14 the first week of May coincided with the retracement of the S&P 500, which bounced back from an atrocious February. In this sense, the stock has performed along the same trend lines as the S&P. With the S&P now looking like it did just before its implosion back in August of 2015, it may be wise to cover one's position in BETR with a covered put option. However, if one's expectations for the market overall are more optimistic than the writers at Zero Hedge (Durden), a bullish call could be in order. Either way, BETR offers a small option chain and one could cover one's investment with the purchase of an OCT 16 put option strike price of $15 for $2.55 (the current ask). Implied Volatility is at 59.29%, so one could choose to let the stock cool off before purchasing the put -- and considering the price action of the underlying in the past week, this might be the best idea. However, if one is feeling uneasy….....

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