Shopping For Vitamins

$VSI tumbled some 35% yesterday after its earnings report.  On the surface the numbers were uglier than expected.  Terrible.  I see some talking bankruptcy in the near future.  Who knows, anything is possible.  What I see is an opportunity.

The stock price for $VSI is like a tomato left out in the sun.  It is rotting and wrinkled.  From $65 to $6 over the course of the last three years.

What was once a great buy at $65 has turned into the short of the century at $6.  Amazing how this market works.  The no brainer short is a stock that has dropped 95% over 3 years.  And perhaps the shorts, will be right about the last $6 of downside.  The stock is down $60 whats another $6?

While the selling was hot and heavy, and the stock down 35% , I entered September $7.50 calls yesterday for $.15.

Perhaps $VSI will drop another 20% down to $5.  Perhaps it will go to zero.  Perhaps nuclear war will break out and none of this will matter.  Nothing is ever certain.  However what is certain is that $VSI's  tangible net value was higher at yesterdays close than the price investors were willing to pay for the stock.

Technically if $VSI closed its doors today and liquidated everything, and paid backs its debt,  shareholders would get at least $6.40.  Yet investors were willing to sell the stock almost 10% lower than that.

Perhaps they are right.  When trading a stock, price action is really all that matters and right now investors are selling the stock at a discount. Maybe  that rotting tomato is rotten to the core.  No seeds to be procured for the next harvest.

On the surface, after charges $VSI posted an over $6 per share loss.  But this was due to one time charges.  Take those away and by some miracle $VSI actually posted a $.23 per share profit.  A profit?  Impossible for a company that is supposed to go bankrupt to post a profit.

This is not a company saddled withe debt.  Interest payments remain low.  And on the bright side, this quarters massive loss is actually a tax write off down the road.

And with the stock at record lows, the company remains authorized to buy back over $100 million of its own stock.  What better time to reward long term shareholders than to reduce the outstanding shares at a cost that has never been lower.

If $VSI utilized its entire authorized share buy back  program at the current market price  it could reduce its outstanding shares by some 70%.


$VSI is in a position to acquire a lot of its shares at record lows while it works on turning things around.

I like the risk/reward here for a recovery into the early fall.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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