$PSMT Pricesmart is the company that runs COSTCO, SAMS Club and BJ's-type stores in Latin America and the Caribbean. The most-recent earnings report from the company was also greeted with an orgy of buying. The stock itself is up over 20% since that report, at least 50% the last 2 months and it also posted a strong trading day today. Like the overall market, $PSMT seems impervious to any downside. Take a glance at this chart from 2004 when $PSMT was trading for $4 a share.
Its been a remarkable rally, one that could continue to the upside. However, I think we may have seen the top for now, and here's why:
Basically, the latest earnings report was nothing extraordinary. On the surface, $PSMT beat EPS by $.03 but missed on revenue by over $1 million. The market cheered these results, sending the owner of 32 wholesale clubs to new all-time highs. Central America, the Caribbean, Latin America; apparently, this is the place to be as the company boasted 10-plus-percent sales growth over the last year.
But does the above warrant the recent spastic rise in $PSMT? I know the central banks are forcing investors into risky assets and $PSMT is performing well, but does it deserve the price the market has brought it to over the last few trading sessions?
In truth, I believe the stock is poised for a pullback. I also think the $115 November puts will act as a great trade when this pullback occurs. The last trade for these options was $.60, and I'm in these options at $1.20 and am not the least bit worried about my position. In fact, I think the run-up in $PSMT will come to a halt and that the stock will drop, consolidate and perhaps even resume its upside.
In short, I like the risk/reward on the short term puts. The market isn't pricing in a pullback and the stock will pull back to $110-$112. At that point, I'll sell for a profit and move on. Nothing goes up forever, and this is a stock no one thinks will fall. And that's exactly why I like it for a pullback.