Chris-
There has been significant accumulation of NM stock ever since late December when the stock bounced off of $5.25. I believe that a few different parties have taken a large position in NM, and considering the technical movement in the stock recently, I believe something is imminent. I also find it interesting that Guthy-Renker released info. about a lawsuit that NM had heard nothing about. The news knocked the stock off of its near perfect flatline that it had been forming. Since News owns G-R, it seems to make sense, although it's a bit unethical, to issue a press release with the intention of knocking down the price more. Since last week, NM has been as low as $6.25 presenting more opportunities for accumulation by a potential acquiror.
I have been suggesting that NM was a takeover possibility since last summer, when the stock was undervalued at $16. I am even more certain now. Somehow, the stock is being manipulated, or else it wouldn't be staying this low.
10 business days following the accumulation of 5% of NM shares, the acquiring party must file a 13D with the SEC. If 4 parties each gather 4.9% of the stock, and then combine their holdings, for the purpose of a buyout, they can announce it as holding a near 20% interest in the company. But since each party stayed under 5%, there was no requirement to file the 13D. If a 13D comes out, chances are the buying party will issue a press release the same day as the document becomes public. This is most likely to occur on a Friday afternoon, since it allows the most time for review and analysis of the info., especially if there is a 200% premium on the stock price.
Regarding options, I don't think that it's speculative fever. If someone is bullish enough to buy calls on the s&P500 index, good luck to them. But downtrodden companies like NM are clearly undervalued no matter how you slice it, and buying calls makes sense to me. The key to successful call buying is to buy the next months expiration, and then when they expire, buy the following month. For example, I recently let my February 10 calls expire worthless. Last week, I bought my March 10 calls. Until the company is bought, my options will continue to expire worthless, and I will lose my "investment" in the calls every month. But if I can receive a 50-1 return on the March 10 calls (if NM goes to $20), it way more than covers my monthly losses.
March 12.5 calls may offer a better deal. But, whereas I am certain that any buyout would lift NM over $10, I am only fairly confident that it would move beyond $12.50. Options are not speculative. NM stock is speculative. Buying call options is gambling, pure and simple. I am a stock investor, not a trader or an options guru. But on occasion, options provide tempting leverage, and I believe now is such a time. I rarely buy options, but now seems like a good time.
$15,000 in call options for the March 10 calls can become $1 million if NM is bought at $20. That kind of return on "investment" is very favorable. I wouldn't do it if I didn't think the company was a target.
Best of luck,
TDW |
