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Unusual Activity: Buying Into Beaten Down SuperValu

With all eyes on retail and a big downturn in many of the stock, Pete Najarian went shopping for a deal in the sector. After seeing unusual activity in the options market, top trader Najarian bought calls in SuperValu, which is down 30% year to date.

Why is now the time to get in? Pete points to the valuation: "You look at the valuations, you can see how it's traded this year. Revenues continue to be a struggle. They beat on earnings last quarter, missed onrevenues and everything seems to be on the decline…When the stock's sitting near the low end of where it's been trading for a long period of time, [it] gives people time on a stock that's trading at a five multiple right now, you can understand why there's interest." Pete bought calls and will be in them for a few months.

Joe Terranova chimed in and added, "[SuperValu] is a name that clearly was beaten down in April. I think it was down close to 15%.Obviously, one of the problems for it is price deflation as it relates to food. Need to see some of that coming back once again. The fact that Pete is in thisuntil October gives him a fair amount of time for that."

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Pete Najarian is long calls in SuperValu