BACKGROUND: I was looking for some place to park extra cash with a higher yield and possible growth. This used to be possible with junk bonds, and here is an unfolding story from Junk Bond Investor\*, that also applies to the stock.
*Two years ago, Newell was a fallen angel without a credible path back. The company was guiding to another year of core sales declines and the story hadn’t changed in five years (i.e., too much debt, not enough FCF, and private label taking share). None of that mattered to the credit market though. The bonds still traded roughly in line with BBs.*
*The next 12 months then played out about as expected. The February 2025 guide disappointed, Liberation Day pushed the 2030s past 550bps on China sourcing, and the agencies took the unsecureds from BB to B. By November, the 2030s were at 425bps.*
*They’re now at \~150bps. That’s through the BB index and the tightest level in about 2 years, for a credit still with $5.1bn of gross debt. Roughly 280bps of compression in ten months.*
*Underpinning that is the beginning of a turnaround. Core sales grew 2.3% in 2Q’26, the first positive print in 4 years, and the market sees it as execution confirmation. The question now is whether today’s pricing is justified and how much cushion is left if the turnaround proves temporary*
Stock / Options Outlook: After viewing the bonds chart, which is very similar to the stock chart. The stock fell to a low of $3. In early August it recovered to $7. It has since fallen back to $6, or about 14% off.
In the attached stock chart (daily bars) you can see that it has support near the fib 382. Whether or not 382 holds or it continues to fall to fib 50 will confirm or deny strength for a move to fib 138 (near $8.60). The 382 fib on this wave has convergence (Boroden) at the fib 50 of the shorter wave. The wave count appears to be a corrective subwave 4 of a larger wave 3, thus my thinking for targets.
The chart shows it takes about 2 months for a move, so my choice will be OTM calls for Mar '27 for an initial position.
***CAUTION:*** the volume and open interest on these calls is very low, perform your own due diligence.
\* [junkbondinvestor.com](http://junkbondinvestor.com)
https://preview.redd.it/rj9tseh60aoh1.jpg?width=1067&format=pjpg&auto=webp&s=21b08ac8d3555d1d00d7c1dceb8e69deff597a2f