On CNBC’s “Options Action,” Carter Worth said the Wall Street analysts do not like Fastenal Company (NASDAQ:FAST). Of the 16 analysts that cover it, only three have it as a buy. The company is going to report earnings on July 13 and Worth expects it to do well, so he is a buyer of the stock.
Worth likes Fastenal because it’s trading in a steady uptrend and it is very much in its channel. He has also analyzed its relative performance to the Industrial Select Sector SPDR Fund (NYSE:XLI) and he noticed that it bounces off its trendline every time it touches it. It’s now testing that relative trendline and Worth expects it to bounce again.
Mike Khouw is also a buyer of Fastenal and he wants to make a bullish bet with a calendar call spread. He wants to buy the November $52.50 call for $3.50 and sell the August $55 call for a dollar. The trade would cost him $2.50, which is also the difference between the two strikes. To make money on the trade, he needs the stock to trade higher, but below $55 at the August expiration, so the August $55 call expires out of the money. He would then sell another call and hope the stock moves towards the new strike.
