A double from a crisis trade

It is really an unbelievable journey for this crisis speculation I made early this year. If you have followed my blog, you should know that I did a quite "risky" (at least seemingly) speculation for a turnaround for the deeply troubled stock, Rite Aid (RAD) (see here). Back then, nearly everyone was betting for its bankruptcy but I saw its underlying value. So I did a crisis speculation with its call options. Glad I did so! While most of the time my calls were deeply in the water, all of a sudden, Bomb! It's exploding.... and to the upside. Within a month, RAD is shooting up 120% as its recent earnings were 18 times better than expected (and 90+% up just this week)!! You probably can never guess what has made so much contribution to its great earnings for the quarter: ice scream!!! My wife said their ice cream may be containing cannabis that hooks people into "addiction" 💤👀
Sounds crazy how could all the Street experts so much having mispriced this company, right? So don't listen to the so-called WS analysts but to me . See the RAD one month chart below:

While my timing was not great as I was way too early but I'm still glad to have mad the bold bet with a double by now. Since my calls will expire in Jan, I won't risk anything but took my profit and watch now. I think RAD will still have a great potential after it is cooling off a bit.

Today, I have another idea similar to RAD's crisis. It is about the U.S. Steel (X), which is currently priced for bankruptcy.  Last Friday, the company surprised the Street by updating its fourth-quarter guidance with a significantly bigger projected loss than Wall Street had previously expected. It really sucked and spooked investors! No surprise for the reaction: X fell more than 10% on the day. But the company is currently trading at just 0.3 times price-to-book ("P/B"). At those valuations the company's assets alone  (the book value) should offer a floor to valuations. And even X can not earn as much as expected, the company has no real risk of bankruptcy in the near term, with no debt maturities and significant flexibility around their obligations. So here is the point good investors ought to learn: when a company starts to trade at a significant discount to its assets this tends to serve as a "floor" for valuations. That's kind of crisis speculation all about: something priced in for a bankruptcy but the actual chance is low and even so, its underlying assets can easily cover its liabilities. This kind of hidden value requires some gut to explore but you don't need to bet the farm for a good profit. Of course buying its stock directly is an easy way to do the crisis speculation, although the risk is quite high for sure. But I have an idea that can bet for it for long term with no cost upfront. That's what I'm sharing with my Family for X and more.  

If you are interested, send email to dwmt19@gmail.com