Monday, April 30, 2012

WYN: Vacation lodgings

Wyndham Worldwide Corp. (WYN) operates a full range of vacation lodgings, from hotels and resorts through rentals and exchanges to ownerships. Among the brand names in its portfolio, in addition to its own, are Ramada, Days Inn, Super 8 and Howard Johnson.

The Parsippany, New Jersey company operates in North America and the Caribbean. Although founded originally in 1981, Wyndham went through major restructurings beginning 1999, was taken private for awhile, and only returned to public trading in July 2006.

WYN had the most bullish chart out of 34 stocks added over the weekend to the Zacks top-buy list. However, it was a fairly poor selection of charts -- many were in downtrends -- so coming out best wasn't much of a challenge.

WYN began its most recent leg up in October 2011 from $29.65 and has risen to Friday's all-time high of $50.82.

A 9.5% earnings surprise on April 24 produced an opening gap to the upside and three intra-day rises. Trading so far today has been intra-day decline that has, for the most part, remained within Friday's range.

Wyndham Worldwide has return on euqity of 16% with a very high level of long-term debt amounting to double the company's equity.

Institutional ownership is high, at 93%, and the price has been bid up to the point where it takes $1.70 in shares to control a dollar in sales.

Earnings are seasonal, peaking in the 3rd quarter -- summer -- as expected of a hotel and resort company. Third-quarter earnings have increased over the prior year's quarter since 2011.

WYN on average  trades 2.3 million shares a day, producing a wide selection of options with good high open interest and narrow bid/ask spreads near the at-the-money mark.

Implied volatility stands at 27%, in the lower half of its six-month range, and has been trending sideways for most of April.

Options traders are pricing in a 68.2% chance that the stock will close between $46.23 and $54.09 a month from now, for a maximum gain or loss of 7.8%.

Decision for my account: I consider WYN to be a potential position for my account. In light of today's intra-day decline, I won't buy until I see the rise continue. I'm not looking for a fresh breakout above Friday's high of $50.82. I do want to see an intra-day rise before entering.

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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