Ruth’s Hospitality Group (RUTH)

Just when you thought it wasn’t safe to eat steak anymore, along comes Ruth’s Hospitality Group (RUTH) with a strong quarterly earnings report last week to swat away worries over America’s self-professed, but perhaps half-hearted, aversion to the red meat. The company reported adjusted earnings of $0.10 per share, which was 11% higher than the $0.09 average analyst estimate.

That may be why someone placed a huge options bet on RUTH in early September, loading up on 4,000 call option contracts with a strike price of $17.50 that expire in February. Since each contract controls 100 shares of stock, the total value of that transaction equates to roughly $6.3 million at a recent share price of $15.85.

That’s a lot of dough riding on a restaurant chain that seems hopelessly out of sync with America’s eating habits. But with employment in this country on the upswing, perhaps a lot of people feel like it’s time to go old-school and treat themselves to a juicy steak, loaded potato and glass of scotch. Keep in mind we also have a couple of healthcare stocks in our portfolio, so we may end up profiting in more ways than one if they keep it up! 

Stock Talk

Jim Pearce

Jim Pearce

RUTH is very close to our target price of $15.78, and with only a month left on our target holding period I will be quick to close out this position if it closes above the level. In the meantime, RUTH is still well above its 50DMA price of $14.80 and its upper Bollinger Band just popped back up to $15.92 so from a technical standpoint it should be able to rise further.

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