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We LOVE 20% Returns!

Date: Tuesday, November 27, 2018 11:25 AM EDT

Another day, another 20% return for BAD BEAT Investors. You read that right. Check out our alert below sent out a few weeks ago to subscribers. You can join NOW, with our Cyber Week Special for $1.08 per day (at the annual rate).

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Lumentum holdings (LITE), which is down about 40% from its recent highs after we hit another homerun on it in August. At the time of this writing, is on our radar as a BAD BEAT once again. The big issue is that it took a bit of a lump with earnings, a bit of a lump with market in October, and now is suffering a bit as a pin action play on with what we are seeing with Apple (AAPL), as well as downward guidance revisions in the space from suppliers. THIS is opportunity and our traders need to get on board NOW.

In short, despite some fuzzy guidance following the quarter and the recent "scare" with Apple, we think the data support a share price that should higher. Seemingly the sweet spot appears to be under $40 entry. While we should always be cautious, we like the play.

So, combined with decent technicals, we believe we have another BAD BEAT brewing with LITE on our hands here. The closer this name gets to $50, the more we believe that Lumentum should be considered for a trade by our members. As always we will keep tight stops, but this one could have legs once again, like we saw with our previous two plays. Recall that we first talked about this play when the Oclaro deal looked like it might fall through. That deal has pluses and minuses of its own. We think Lumentum will be fine with or without it. The company announced its acquisition of Oclaro back in March but the ongoing trade-related tensions between U.S and China have led the market to price in some risk. We also know tariff pressures have hit optical names, but it seems once again overdone.

You may have seen this graphic before, but the deal will benefit both companies, and their customers. We would like to see it close even if Lumentum would be fine without it. We like the consolidation as merging companies yields a balanced firm with nearly equal exposure to both optical transmission and optical transport segments. Don't forget a strong high-speed business that has been growing nicely in the last year. This will be an offering of instant growth. We still have the ZTE exposure risk and Oclaro had generated a sizable portion of its revenue by selling components to ZTE so we hope that there are no more issues with US regulators on that front. Either way, we like Lumentum.

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