Friday, 15 June 2007

Moving the long from Apache to Applebee's

Great performance from Apache Corp...taking profits and moving into Applebee's (casual dining business). Just ridiculous that in 2 weeks, APA moved almost 7% higher whilst ATI (Allegheny Technologies) dropped over 5%!! So taking advantage of APA outperformance.

APPB (Applebee's) is currently undergoing a strategic review of its business, including a sale to private equity. From what I've read, there is a bidder above $26.50 and still 3 parties interested, so no reason this stock couldn't pop a couple of bucks higher from here, given it's trading at $26.29 just now. So it seems like a fairly defensive long position, having a possible floor in the stock price, in what seems a fairly overbought market at the moment. And even on its on it's not a crazy long, yes the P/E is ~31, but forward P/E is just under 20...not cheap, but sustainable if the company can expand and grow, and not get hit by lower consumer spending (which seems a decent risk to me). Market cap is $2bn, and with about 2000 restaurants, that's about $2mm per that high? No idea!

So with APPB at $26.29, I'm getting long versus selling out my APA which is at $87.46 (6.8% higher than where I bought it 2 weeks ago at $81.90). Going to keep the ATI short for a little bit, think around $105 I may take it off, keeping a close eye on Apple for a short entry point...dangerous given current stock action, but there seems to be too much euphoria both in the stock price and in the IPhone.

No comments: