Another profit opportunity is starting to build
Today's Financial News - Posted May 15, 2009
This management team has guts. YRC Worldwide (NYSE:YRCW) knows its chances of getting any shot at TARP money is slim, yet they are making noise and getting heard. It will create yet another opportunity for savvy investors to rack up big profits.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): The banks got money. The insurers got money. The automakers got money. Even the unemployed got a boost. So why not the trucking industry?
If you followed one of my recent covered call positions (a beta-testing play that helped successfully launch TFN Strategic Trader), you are familiar with YRC Worldwide (NYSE:YRCW), the nation’s largest trucking company.
We traded the stock for kick-butt gains of 83% on our first half of the position and 107% shortly thereafter on the remaining half. We took advantage of the tremendous uncertainty and volatility surrounding the company, and investors that took my advice (there were plenty of ‘em) put some profits in their pockets.
Since I made my final sell recommendation, the company’s shares have dropped even faster than they climbed. Shares are down by about 15% just today.
What gives?
Investors are fleeing as the company knocks on the Treasury’s door asking for a chunk of what’s left of the dwindling tarp fund.
But instead of asking for $75 billion or even $15 billion, YRC Worldwide is asking for a mere one billion dollars to help shore up its retirement obligations.
It’s chump change in today’s world of bailouts.
As with any company related to organized labor (please don’t get me started on the subject), YRC Worldwide has gotten itself into some expensive labor and pension contracts.
When the nation was moving goods across the country with record demand, the obligations seemed manageable. But now that trucks are sitting idle and the countless ads for over-the-road drivers are disappearing from local newspapers, the contracts have become unbearable.
YRC Worldwide recently got its union to make some contract concessions, but apparently it wasn’t enough. They are going to Washington asking for even more help.
Not a chance of success
I sure hope they do not seriously think they are going to get it. Management is going to have to scream a lot louder than a few articles in financial rags to get the kind of attention and money from Washington that it get back into high gear.
I am sure this is just the first strategic move by a team of motivated executives.
This is good news for speculative investors, however. Look at it this way. Does today’s news truly change what we knew about YRC Worldwide?
No way.
The company’s problems have been bantered around since the beginning of this crisis. Smart investors were whispering about trouble long before that. A liquidity crunch has been priced in for months.
This week’s sell off means we will get yet another opportunity to bank some gains from this company.
I have a feeling TFN Strategic Traders will get their opportunity next week.
Going to join them?
Next Article: India’s political fog begins to rise
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