Option Trade 
Fastenal Company (NASDAQ:FAST) Calls 
Friday, April 07, 2017

** OPTION TRADE: Buy the FAST MAY 19 2017 52.500 call at approximately $0.90. Place a pre-determined sell at $1.80.

Note: No protective stop losses added -- but if you wish to do so make it $0.35.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

Fastenal Company (NASDAQ:FAST), engaged in wholesale distribution of industrial and construction supplies, will release its first quarter earnings results before the bell on Wednesday, April 12th.

Fastenal is expected to report earnings at $0.46 per share according to the Consensus Estimate. Last quarter they reported earnings at $0.47, beating expectations by a penny. Their average EPS surprise is 2.96%.

The company is boosting sales performance at stores through additional sales support and vending machine installations. The company's cost-saving initiative, Pathway-to-Profit, also bodes well.

Meanwhile, shares of Fastenal outperformed the categorized Building Products - Retail/Wholesale industry in the past six months. Also, analysts' expectations have been trending upward. The current quarter has seen two upward estimate revisions in the past 60 days, while full-year estimates have seen five upward revisions over the same time frame. As a result, the current quarter and year consensus estimates moved north, justifying the company's Buy rating.

Fastenal Company has been on a run — rising 10.33 percent in just three months. The stock has actually made strong gains in the past year, as the company has gathered a 12.88% return in the past twelve months.

The company’s share price is down -1.99% from previous highs of around $52.74 per share on April 05, 2017. On the bright side, the company’s share price has been on the rebound, up more than 32.63% since hitting lows of $37.7 on October 14, 2016.

Fastenal Company has a market cap of $14.96 billion, a PE ratio of 29.91 and a beta of 1.02. The company has a 50 day moving average of $51.04 and a 200-day moving average of $46.62. Fastenal Company has a 12-month low of $37.70 and a 12-month high of $52.74.

Recently, the commodity stands -2.33% away from the 52-week high and 38.58% from the 52-week low.  The RSI (Relative Strength Index), an indicator that shows price strength by comparing upward and downward close-to-close movements is 53.95 for Fastenal Company.

Influencing Factors to Consider               

Fastenal has adopted FAST Solutions, an industrial vending process that has the potential to revolutionize the industrial distribution system and increase profitability. Industrial vending is one of the primary growth drivers for the company. In fact, the company is optimizing its vending machines to drive signings and boost efficiency.

Also, in order to increase profitability, the company has gradually grown from a fastener distributor to a full-line industrial supplier. It has expanded its product lines to include an internal manufacturing division, government sales, Internet sales, metalworking and industrial vending.

The Pathway-to-Profit program is also encouraging. Under this, the company focuses on increasing the average store size which leads to better earnings leverage by spreading operating costs over higher sales and thereby driving pre-tax margins.

Management believes that the recent improvement in margins (improved 50 bps sequentially in fourth quarter) on non-fasteners, a higher mix of sales of exclusive brands and better purchasing will continue to offset any ongoing headwinds. Additionally, recent increases in steel and other commodity prices add to the positives.

Analysts and Hedge Funds Opinions

Several brokerages have issued reports on FAST….

  • Zacks Investment Research upgraded shares of Fastenal Company from a “hold” rating to a “buy” rating and set a $58.00 price objective on the stock in a research note on Tuesday, March 21st.
  • Credit Suisse Group AG raised their price objective on shares of Fastenal Company from $41.00 to $49.00 and gave the stock a “neutral” rating in a research note on Thursday, January 19th.
  •  Stifel Nicolaus raised their price objective on shares of Fastenal Company from $44.00 to $50.00 and gave the stock a “hold” rating in a research note on Thursday, January 19th.
  • Avondale Partners upgraded shares of Fastenal Company from a “market perform” rating to an “outperform” rating and raised their price objective for the stock from $51.00 to $54.00 in a research note on Thursday, January 12th.
  • Finally, KeyCorp upgraded shares of Fastenal Company from a “sector weight” rating to an “overweight” rating and set a $53.00 price objective on the stock in a research note on Thursday, January 5th.

The latest Fastenal Company SEC filings have revealed that institutions owning shares of  have increased their transactions by 5.94% in the past quarter.  Institutions now own 84.60% of the company.

Several hedge funds have recently modified their holdings of the company……

  • Capstone Asset Management Co. increased its stake in Fastenal Company by 11.9% in the third quarter. Capstone Asset Management Co. now owns 56,221 shares of the company’s stock worth $2,349,000 after buying an additional 5,980 shares in the last quarter.
  • MSI Financial Services Inc increased its stake in Fastenal Company by 34.7% in the third quarter. MSI Financial Services Inc now owns 5,820 shares of the company’s stock worth $243,000 after buying an additional 1,500 shares in the last quarter.
  • National Pension Service increased its stake in Fastenal Company by 9.3% in the third quarter. National Pension Service now owns 216,335 shares of the company’s stock worth $9,038,000 after buying an additional 18,476 shares in the last quarter.

Harvey’s Options Volatility Indicator

Conclusion

From a technical perspective, there’s a strong possibility that the stock could enter into a new bull market after finding strong support between $50.88 and $51.29.

Greater clarity on the upside of the stock can be had by taking a look at another set of technicals. FAST’s +0.27 have created a positive sentiment when measured over the past 30 days. FAST has underperformed the S&P 500 by -2.71. This initially, has created lower volatility levels when compared to other stocks in the same sector. Historical volatility for FAST is showing a reading of 18.53%. FAST also presents with an Average True Range reading of 1.86. FAST has demonstrated through its technical indicators, the sentiment of the markets towards its upside.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

 ** OPTION TRADE: Buy the FAST MAY 19 2017 52.500 call at approximately $0.90. Place a pre-determined sell at $1.80.

Note: No protective stop losses added -- but if you wish to do so make it $0.35.

 ”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.

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