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Top Trades for Thu, 19 Sep 2019 11:19 – MDR and CASH!!! Call

 

I'm never going to get to them but I want to be clear that I want to also cash out the LTP and STP.  I will do a review and note the "keepers" but, at the moment, the LTP is $1,729,833 (up 246%) and the STP is at $886,611 (up 786%) and when they were at $2.2M I was going to cash out ahead of the 7/31 meeting and quickly regretted it as we dropped close to $2M, now we're at $2.6M and MAYBE we get to $3M or maybe we drop back to $2M but I KNOW I can easily make $400,000 with $2.6M in cash to get to $3M but it will be a lot harder to have to start again with $2M and get to $3M – probably a year harder and there's that time thing again.  

So, in conclusion – it's simply not worth the risk! 

 

MDR/DC – Fortunately, we got out of ours a long time ago as we never wanted them, we just liked CBI, who they merged with.  Needless to say, the merger has not gone well (which is why we didn't want to ride it out) and now they are calling in restructuring experts.  MDR says it "is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet."   You can take them at their word (as no one is) or you can imagine this is a sort of cover-up for their emergency measures to stave off some sort of disaster that's looming.

I do watch them (because they took away my CBI) and last year they took a $2.7Bn hit on write-offs and such and this year they lost about $190M in the first two Qs and it's doubtful they turn that around by the end of the year but they have $455M in cash and I bet they end up down less than $100M for the year with a profit in Q4.  

Assuming that's true – then $1.65/share is just a $300M valuation for a company doing $10Bn in business but $7Bn of that is CBI's biz and people are extrapolating MDR's poor performance to CBI's $7Bn – that's not likely to be the case but this year, as we expected, is a transition year and numbers look like crap and, if the economy tanks, then their timing is likely to kill them but, if we keep things together, they just got $4.5Bn worth of contracts from Aramco and another one from Qatar but probably just $100M for that one.  Still, that's business for the next 6 months on top of the normal stuff they have going on – there are possibilities so I like them as a flyer. 

At the moment, I'd buy the 2021 $1 calls (now $1.35) and wait on selling the $2 calls (now $1.05) as long as we hold $1.50 on the stock.  Hopefully we pop back over $2 and we can get $1.25 for the $2.50 calls (now 0.95 with a 0.75 delta).


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