27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
With shares trading more than 20 percent higher since a distribution increase announcement in July, Hi-Crush Partners LP (NYSE:HCLP) was downgraded by Simmons & Co. on valuation concerns.
The Analyst
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Simmons & Co.'s John Watson downgraded Hi-Crush Partners from Overweight to Neutral with an unchanged $14 price target. Simmons is the energy specialty division of Piper Jaffray.
The Thesis
Hi-Crush Partners, a provider of proppant and logistics solutions to the North American energy industry, benefited throughout the energy downturn from multiple impressive strategic decisions, Watson said:
- Equity issuance with "impeccable timing."
- The acquisition of an in-basin mine before its competitors.
- Bringing mines online at an opportune time.
- A focus on logistics.
While the company deserves credit, a downgrade from a bullish stance is warranted after a 22-percent gain in the stock since the distribution hike, the analyst said. (See Watson's track record here.)
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A downgrade could prove to be the wrong call if NWS sand demand doesn't fall as is expected in 2019 and 2020, Watson said.
The analyst is modeling for a decline in the company's last-mile solutions profit into 2020, but Hi-Crush may be able to restructure contracts to eventually normalize profits to a degree, he said.
If both of these favorable scenarios play out, the upside case for Hi-Crush Partners' stock would be materially higher, but for the time being the stock's strong run over the past few weeks can't be ignored, Watson said.
Price Action
Hi-Crush shares were trading down 2.1 percent at $12.82 at the time of publication Tuesday.
Related Links:
A New Frac Sand Giant Is Born Amid An Industry Shift
Hi-Crush Rises On Acquisition, Expansion, Financing Plans
Public domain photo by the U.S. Geogolical Survey via Wikimedia.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.