TRADE INSTRUCTIONS
Date: June 13, 2017
Name: Omega Protein Corp.
Symbol: OME (NYSE)
Type: Open
Limit: Buy below $18.50

TRADE TARGETS
Holding Period: 4 months
Target Return: 15.9%
Annualized Return: 47.7%
Target Price: $21.45
Stop Loss Level: $17.25

COMPANY DESCRIPTION
Omega Protein Corporation is a nutritional products company that develops, produces and delivers nutritious products through two segments: animal nutrition and human nutrition. Omega Protein, the Company’s principal operating subsidiary, is dedicated to the production of animal nutrition products and operates in the menhaden harvesting and processing business. Link to company website.

TRADE RATIONALE
Omega Protein seems to have been founded on the belief that the two things most people will spend a lot of money on no matter how the economy is doing are their children and their dogs (but please don’t ask them to rank those two in order of importance). In simplest terms, the company harvests fish and finds a way to use every piece of them in pet food, human food, and nutritional supplements.

Sounds pretty straightforward, but lately OME has hit a snag as it attempts to rebound from violations of the Clean Water Act several years ago for dumping contaminated water from its fishing boats. That sentence was handed out in 2013, and just three months ago OME disclosed it was the subject of a SEC investigation regarding its alleged non-compliance by a whistleblower with the settlement terms of that case.

As you might expect, its share price dropped by nearly a quarter that day and has since drifted lower as investors await closure to this issue. Until recently our Rapid Profits Matrix did not see enough upside potential in OME to issue a trade alert for it, but now priced at less than 13 times forward earnings it has become oversold and likely to bounce 10 – 15% on any good news regarding its legal issues.

We have no way of knowing when that might be, but it appears most of the near-term downside risk in OME has already been realized. And we don’t need much of a change in sentiment for its share price to move appreciably, as 96% of its float is held by institutional and mutual fund investors. With only 4% of its stock in the hands of retail investors, even a minor uptick in demand for the stock could quickly push it up to our target price.  

Note: OME is optionable, but trades on thin volume so use price limits when entering orders.