TRADE INSTRUCTIONS
Date: July 19, 2017
Name: B. Riley Financial
Symbol: RILY (NasdaqGM)
Type: Open
Limit: Buy below $20.25

TRADE TARGETS
Holding Period: 4 months
Target Return: 22.1%
Annualized Return: 66.3%
Target Price: $24.70
Stop Loss Level: $17.50

COMPANY DESCRIPTION
B. Riley Financial, Inc. is an independent investment bank. The Company’s segments include capital markets, auction and liquidation, valuation and appraisal, and Principal Investments-United Online. The capital markets segment provides an array of investment banking, corporate finance, research, wealth management, sales and trading services to corporate, institutional and high net worth clients. The auction and liquidation segment utilizes a scalable network of independent contractors and industry-specific advisors to tailor its services to the needs of a multitude of clients, logistical challenges and distressed circumstances. The valuation and appraisal segment provides valuation and appraisal services to financial institutions, lenders, private equity firms and other providers of capital. The principal investments-United Online segment consists of businesses, which has been acquired primarily for attractive investment return characteristics. Link to company website.

TRADE RATIONALE       
We’ve had a lot of success with our momentum trades lately, and our Rapid Profits Matrix found another one this morning that looks promising. You’ve probably never heard of B. Riley & Co., but that’s the way the company likes it. It prefers to work behind the scenes, engineering investment banking deals without drawing the attention of potential competitors until the deal is done.

But you may have heard of one of its subsidiaries, FBR Capital Markets (formerly Freidman, Billings and Ramsey), which continues to make money advising companies involved in mergers and acquisitions. You don’t hear much about it, but this type of riskless business activity is infinitely scalable and capable of generating enormous fees with very little incremental increase in costs.

You have to be very good at it to win this type of business, which RILY has demonstrated by increasing its revenue by 165% during the past year. Currently priced at less than 11 times trailing earnings, RILY appears cheap despite having appreciated 40% during the past three months.

However, it’s still slightly below its all-time high share price of 21.30, so a breakout above that level could push the stock into the mid-20s. With many Wall Street analysts calling for heightened M&A activity during the second half of this year, we expect RILY to see a marked increase in fee income over the next four months.

NOTE: This stock is not optionable.