Beyond Meat (BYND) shares rebounded this week and soared today, but our short position in a BYND put option contract already closed yesterday when it was purchased-to-close by a standing limit order. Had I known BYND shares would appreciate more than five percent this morning I would have set a lower repurchase order for the contract (expiration: 24DEC2020; strike: $100).
Beyond has been in the news consistently since McDonald’s announced their McPlant offering and BYND trading become so volatile that trading was halted. After reporting lackluster sales growth on 14NOV2020, BYND stayed in the news this week by announcing their newly improved iteration of its burgers that are supposed to taste more similar to meat. Unilever, one of the world’s largest food manufacturers, announced its ambitious new target for sales from plant-based products, and BYND launched a plant-based pork product in China.
Source: MarketWatch.com, accessed 18NOV2020
BYND shares are trading at very high multiples of revenue (the company is not yet earning profits) and investors did not appreciate the quarterly report released last week which disclosed lower revenue in the third quarter of 2020 compared to revenue for 2020’s second quarter. I used the market’s reaction to sell the most recently closed BYND put contract and yesterday we closed the position to net $63.61 after holding the position for a long weekend. That’s a 0.6% return on $10,000 of capital or 58% annualized.
My nutrition is now predominantly plant-based, so I’d really like BYND to succeed; especially if their burgers continue to become tastier and tastier. I wouldn’t mind owning shares at some point, which is why I am willing to write put option contracts on the shares. With the closure of this position, we now have our available cash as 13.9% of the portfolio; I’d like available cash to be 15% of assets.