Selling WGO puts for income.
Winnebago Industries (WGO) manufactures recreational vehicles (RVs) as well as leisure boats.
This business benefited from high demand during the covid crisis as people looked for safe ways to go on vacation without staying in hotels or putting themselves at increased risk of contracting the virus.
Wall Street is worried that WGO’s business will decline now that the global economy is reopening. But WGO is still a very strong enterprise and should benefit from travel this year and also from its watercraft unit that caters to affluent consumers.
Shares currently trade near $48.70 while the company is expected to earn $9.42 per share next year. (2023 profit numbers are more in-line with long-term demand, versus the $12.23 analysts are expecting for this year.)
The stock is a deep value play, with WGO trading at just over 5 times next year’s expected profits. This valuation should keep WGO from falling much further, and there is plenty of upside if investors start to recognize the deep value in the stock’s share price.
By selling the July $45 puts near $2.30, we’re able to collect an annualized yield near 42%, while also giving us roughly $3.70 per share in cushion between the current market price for WGO and our strike price.
- Sell (to open) 2 WGO July 15th $45 puts
- Limit: $2.30 or more
- The new position will represent roughly 10.0% of our model.
- 13:30 Executed
- Sold 2 WGO Jul 15th $45 Puts @ $2.35