Hello subscribers,

It’s only Monday morning, and it’s already been a long week.

Put position VF Corp. reported earnings this morning before the open. As of this writing, the stock is up almost 6%, well above the $55 strike price of the December puts in the portfolio.

We’ve had some very successful bearish trades on VFC, but this one is not working out today. This trade is a very tough but true example of how tricky options bets can be.

In this particular trade, despite the fact that I was correct regarding the trend in wholesale revenue (which dropped 6%), strong revenue from a shipment to Amazon and robust sales at company-owned Van’s sneaker stores buoyed the numbers.

The company lowered estimates for the fourth quarter, an indication that perhaps some expenses were delayed to help the third quarter.

To win on options, you need three legs of the story to work- you need to be right on the fundamentals, right on the psychology or the movement in the stock and right on the timing (the movement needs to happen before the options expire).

On VFC I was right on some of the fundamentals but missed quantifying how strength in Vans could support the bullish thesis. So, wrong on the psychology. Regarding timing, these puts don’t expire until January, so I’m recommending holding them with the chance that investors begin to look at the next quarter with a more critical eye.

A complete VFC review is below.

The flip side of this is the fabulous 45% gain we enjoyed in the Post Holdings (NSDQ: POST) puts last week. The stock melted in response to comments from competitors regarding weak sales trends for packaged foods. We still hold the Pinnacle Foods (NSDQ: PF) puts for exposure on this bearish trend.

Up this week on earnings:

Thursday, October 26: PF (Pinnacle Foods)  

Thursday, October 26: COLM (Columbia Sportswear)  

Friday, October 27: SAIA (SAIA Inc.)

Details regarding all conference calls are below. In addition to the call-in numbers included below, almost every company will stream its call live from the investor relations part of its website:

Thursday, October 26: (NSDQ: PF) 9:30 AM (EST)

Directions: Investors and analysts may access the call by dialing (866) 814-1918 within the United States or Canada and (703) 639-1362 internationally and referencing the conference call name: Pinnacle Foods Q3 Earnings Call.  

What to Listen For:

1. Has the impact of “SKU rationalization” subsided? This industry term simply means grocery stores cutting the number of packaged items (SKUs) that they carry on the shelf. Based on commentary from Kroger, this does not seem to be ending anytime soon.

Thursday, October 26: (NSDQ: COLM) 5:00 PM (EST)

Directions: To listen to the conference call, please dial 877-407-9205. The call will also be webcast live on the Investor Relations section of the Company’s website at http://investor.columbia.com.

What to Listen For:

1. Like VFC, Columbia has pushed out expectations for sales growth from the September quarter to the December quarter. What is the early read on winter sales? Look for tell-tale negative words like customers being “conservative” or remarks regarding more “structural change” for retailers. These are codes for weaker demand from wholesale customers.
2. Sales and marketing expenses have been increasing faster than sales- when will the company get some leverage from this expense and what are they spending it on?
3. Columbia lost one of its seasoned execs in the prAna yoga clothing team. Last quarter management guided that all of prAna’s growth would be pushed into the December quarter. Were prAna sales down in the September quarter?

Friday, October 27: (NSDQ: SAIA) 10:00 AM (EST)

Directions: To participate in the call, please dial 1-800-239-9838 or 323-794-2551 referencing conference ID #9666253.  

What to Listen For:

1. What was the average agreed-upon pricing with contractual customers? This metric increased by 8.2% in the second quarter. While it fluctuates each quarter, mid-high single digits is a good omen for future earnings.
2. The company has been expanding its Northeast offerings. A Maryland location to serve the markets of Baltimore and Washington, D.C., is scheduled for early fourth quarter opening. What is the status of this opening and how is revenue progressing for that terminal?

Around the Portfolio:

Criteo (NSDQ: CRTO) had some big management promotions and enjoyed another round in the bull/bear battle by independent research providers.

Criteo promoted Mollie Spilman to COO. Spilman joined Criteo in 2014 and leads all commercial teams-revenue, supply, operations, and marketing-globally.

The company also promoted Jonathan Opdyke to Chief Strategy Officer.  Opdyke joined Criteo in 2016 as President of Brand Solutions, via the HookLogic acquisition.

In yet another odd twist to the scathing reports published by Gotham City Research, a different firm penned a very bullish report. Independent research firm Anonymous Analytics published a resounding rebuttal supporting Criteo’s practices and business model. I can’t vouch for the veracity of either firm’s research but the rebuttal, found here, includes some very supportive quotes from Criteo customers.

Ichor Holdings (NSDQ: ICHR) price target was raised to $38 from $27 at Cowen  Analyst Karl Ackerman said the Street has mistakenly assumed zero growth in its core business. Given NAND WFE pricing is moving higher combined with positive shipment commentary from Lam Research (LRCX) and Applied Materials (AMAT), estimates appear too low.

Jazz Pharmaceuticals (NSDQ: JAZZ) was initiated with a Buy at FBR Capital.  Analyst David Buck started Jazz Pharmaceuticals with a Buy rating and $206 price target.

Steelcase (NSDQ: SCS) management met with investors in Detroit on October 18 and in St. Louis on October 19 hosted by Sidoti. The stock moved very little on these meetings, and unfortunately, public transcripts are not available from them.

However, It’s encouraging that the company is meeting with more institutional investors to spread its story. The stock is lightly traded, and more trading volume would be a welcome development.

VF Corp (NYSE: VFC) is up roughly 6% on third-quarter earnings. While I can poke some holes in the performance (significant jump in advertising and marketing expense and a decline in wholesale revenue), investors are focusing on the strength of Van’s sneaker brand.

We will not have any luck with the VF Corp (NYSE: VFC) puts today. The drop in the puts price is the brutal face of option volatility where prices can increase or decrease geometrically overnight.

The puts were down almost 90% going into the quarter and are now trading for very little. There are still two and a half months until they expire. With them trading so low, the best option is to hold on to them with the chance that investors become a bit more critical on the quarter.

I also think the exuberance over fourth quarter “bullishness” is misplaced. From my count, the company beat third-quarter estimates by $.11 but increased annual guidance by only $.05. The arithmetic here is that fourth quarter estimates should be lowered by $.06.

The action in the stock is clear that investors are most interested in strong revenue growth, which VFC delivered via Vans and stronger European sales.

This is the painful side of bearish bets. Despite being correct on weak wholesale and North Face revenue, the company has found one strong nugget of growth upon which investors are focusing.

Werner Enterprises (NSDQ: WERN) competitor of SAIA (NSDQ: SAIA) where we have call options in the portfolio reported earnings last Thursday. Earnings missed by a penny due to the higher driver costs and some disruptions due to disruptions from the three summer hurricanes.

Management commented, “At the same time, these events (the hurricanes) improved spot market pricing and further widened the positive gap between demand and capacity, which better positions the freight and contractual rate markets going forward. Freight volumes thus far in October 2017 have been seasonally better than normal.”

Most of the industry trends benefitting Werner’s truck utilization and rates should also help SAIA’s earnings as well. The group tends to trade very choppily so I’m not discouraged by some of the down trading days.

SAIA reports this Friday.