Don't you just love lists?
Apparently, most American's do because the posts that get the most clicks are the ones with lists and quizzes. I don't do lists very often yet, somehow, I still manage to be fairly popular but let's see what happens when I make a list with a catchy headline.
This list is an update of our original 2014 Buy List, which was written on June 6th and originlaly had 20 trade ideas for the 2nd half of the year. That list quickly grew to 29 and, today, we're adding 11 more to make 40 top stock picks to take us into Q4. Those first 29 picks are already 82% successful with only HOV, IRBT, RIG, TEX and WEN failing to make gains so far and, on average, we're up 72% on our picks in just 3 months.
That's about par for the course with our winning percentages on trade ideas but what makes the Buy List special is that these are the ones we are comfortable committing long-term allocation blocks to, not just messing around with short-term trading. In fact, our 5 "losers" all represent great entry opportunities at lower prices and none are being kicked off the list as our general outlook for these stocks is measured in years, not months!
The strategy we are following is summed up nicely in this video:
As we did in building our Long-Term Portfolio, we're not going to rush in and buy everything. We will do exactly what we did in January where, following our Fall Buy List, we simply added stocks from our list whenever they became cheap. While our Members are able to pick up our trade ideas as they are released, we don't always add them to our virtual portfolios right away. As with the first half's Long-Term Portfolio, we will track every entry and exit in both our Live Weekly Webcasts, as well as in our Live Member Chat Room and alerts will be sent to our subscribers (you can join here, Basic and Premium Members get full access).
Our picks were originally grouped by industry sectors but, for reference purposes, I'm going to list them alphabetically below – these are the original trade ideas (the Webinar dates where we discussed our picks are next to the symbol), most are still playable but some have already taken off. Keep in mind, the purpose of a Buy List is to always have a quick reference to find a good stock when you need to add one – these charts dynamically update for that reason:
ABX (5/28) we featured in our June 3rd post - obviously one I like. If you don't want to buy the stock for $15.90 (and we NEVER pay retail at PSW!), then you can sell the 2016 $15 puts for $2.05, which obligates you buy the stock for net $12.95, which is 19% below the current price.
If ABX stays over $15 through Jan 2016, the short puts expire worthless and you simply keep the $2.05 ($205 per 100-unit contract) in exchange for the promise you made – if ABX goes below $15, you may be assigned and own the stock at net $13. Since the net margin on the short puts is just $2.28, the trade returns 90% on margin in 18 months – not a bad inflation hedge, is it?
If you want to get more aggressive, you can add the 2016 $15/22 bull call spread for $2 and you still have a nickel credit but now you have an upside of every penny over $15 up to $22 with a potential return of $7.05 on your 0.05 cash outlay (+14,100%) if ABX gets back to $22 by Jan 2016. Still playable and already in our Income Portfolio.
AGNC (8/27) – NLY and CIM have gotten away and our 3rd favorite REIT is AGNC. Same general concept as NLY and you simply have to believe the management will be able to weather the storm of rising rates. AGNC pays a dividend of $2.60, which is 11.2% of the current price of $23.44. No need to own the stock, you can just sell the 2016 $22 puts for $3 and you either own the stock for net $19 (19% off) or you essentially pocket the dividend you would have gotten in the first place.
AKAM (5/20) is very tempting at $50. Woops, that one is long-gone now but what a great bottom call!
BRCM (5/20) is one we like to buy whenever they are not expensive. They had a nice sell-off last year and we grabbed them at $25 but it doesn't look like that will happen again – now $30.23. They only pay a .48 dividend (1.5%) so forget that and we can sell the 2016 $30 puts for $4.10 for a net $25.90 entry and leave it at that and, if they weren't already in the LTP (we sold the 2016 $25 puts for $3.10 when it was lower) I'd add it now. (We cashed the LTP since then but those 2016 $25 puts are now 0.85 – up 72% in less than a month)
BTU (8/27) – Like ABX and FCX, they dominate their space and that gives them a lot of power and the ability to ride out dips better than most. You have to believe that the World won't get off of coal as fast as some think (and that UN Report on Climate Change is now hanging over their heads) but I think $15 is a good floor and you can sell 2016 $15 puts for $2.10 for a net $12.90 entry, about 20% off and the $13/18 bull call spread is just $2.50 so net .40 on the $5 spread that's $3 in the money (650%) to start – not a bad gamble…
CAKE (8/27) – If anyone has ever been to one where there isn't a line, please speak up. No? OK then, that means they have pricing power in their pocket should they decide to use it (like CMG) but they are benefiting from falling food prices at the moment and dropping 6% to the bottom line.
That means a 2.5% increase in prices (who would notice) can drop another 2% to the bottom line, boosting profits by 30%. Management can do that whenever they need to and, best of all, they only have 184 restaurants, not even 3 per state – plenty of room to expand. The April $44s are $3.30 and the $49s are $1.30 so a $5 spread that's 0.78 in the money for net $2 is nice enough and you can pair it with the sale of the $40 puts at $1.25 for net 0.75 on the $5 spread and worst case is you own them for net $40.75 (10% off)
CCJ (6/7) is down with uranuium as Japan has been slow to restart their nuclear program (depressing demand). Over time it will bounce back and CCJ is very nice for a long-term accumulation at $19.21.
They don't pay a dividend, so there's no reason to own them and you can sell the 2016 $15 puts for $1.30, which nets you in for $13.70, which is 28% off the current price. Since $15 is 22% off the current price, you can be more aggressive and consider the $1.30 to be free money and add the 2016 $17/22 bull call spread at $2 and that makes the trade net .70 – but it's $2.21 in the money to start!
CHK (8/29) - is beginning a triangle squeezy thingy between the 200 ($26) and 50 ($27) dmas and I can't see them being below $24 but I can easily see them in the $30s so I figure it's more likely to resolve up than down.
We've got the Ukraine and nat gas is over $4 again so the time for this one is now, even though they might tick lower should things calm down. The 2013 $25/32 bull call spread is $2.75 and you can sell the $23 puts for $2 to drop the net to 0.75 on the $7 spread that's $2 in the money to start but I'd just be happy with the bull spread for now and, if all goes well, it pays $4.25 (154%) and, if CHK goes lower, then we can sell the $20 puts (now $1) for $2+ and maybe use that money to roll the $25 calls (now $4.75) to the $20s (now $8).
CIM (6/7) is a steady play at PSW. It was one of our top 3 picks for 2013 at $2.86 and now, at $3.30, we still like them – mostly because they pay a juicy 0.36 dividend, which is 11% of the current price but even better after we're done giving ourselves a discount on the entry!
On the right is my trade idea from last January's TV appearance on BNN and that net $1.96 entry is well on track to get called away next January for $2.50 (up .54) and, so far, we've collected 0.65 in dividends (there was a special bonus dividend in January). Assuming we collect the June, October and December dividends for .27 before being called away at $2.50, our total return on $1.96 will be $3.42 – a 74.5% return on our investment in just two years.
Now, perhaps, you can see why we love it so much! CIM is not cheap at the moment so this one is a real watch and wait item – especially as they have not created 2016 option contracts on them yet. We can, however, give ourselves a net $2.95 entry while we wait by selling the 2015 $3.30 puts for .35. Even if we never end up owning the stock (if it stays over $3.30), we're still collecting almost the entire dividend amount against just 0.63 in margin. That's a 55% return on margin between now and Dec (7 months).
CLF (6/7) is another perennial favorite at PSW. I just gave a whole lecture on why I still like them in Thursday's Live Webinar, so we can skip the fundamentals and just say "we like it." This stock is never short on heartache and you need a cast-iron stomach to ride out the dips but below $18 is where we like them and now they are below $15 so – we like them more!
That being said, we'd like them even more for $9.85 and we can sell the 2016 $13 puts for $3.15 and use that money to buy the $13/20 bull call spread at $2 for a net $1.15 credit and an $8.15 upside at $20, which would give us an 700% gain on cash if CLF can manage it's way back over $20 - that's good leverage! ThinkorSwim tells me it needs $1,440 in margin for 10 of these so you get a net $1,150 credit and you start out $1,500 in the money (at $12.50) with the hopes of finishing with $8,150 in Jan 2016.
This is how we like to grow our money. On the downside, if CLF is below $13, we will be assigned 1,000 shares for a net cost of $11,850 ($11.85 per share) and then, since we like them long-term, we can sell long-term calls for another $2 to knock the basis down to $9.85 – but we'd cross that bridge if we come to it. At the moment, the bears are piling on this one, so we're waiting but likely to step in soon.
DBA (8/27) – Was a great trade for us early in the year because we caught it low and had the sense to get out when it went crazy. Now it's back to a reasonable level (we came in around $25 last time) and once again we can go long on the assumption that this is roughly as low as food prices are likely to get. The 2016 $24 puts can be sold for 0.80 and the $25/29 bull call spread is at $1.60, so net 0.80 on the $4 spread has a 300% upside potential and worst case is you own DBA at $24 (the dead low).
EBAY (5/20) still cheap (got 'em in our Income Portfolio). As a new entry, we're waiting to see how low they can go. They are down because Google has changed their search engine rules to de-emphasize the way Ebay (and other companies) list things. This is our favorite kind of alarmist nonsense as Ebay has teams of very smart people who will adapt and survive and this is unlikely to be more than a blip for them.
At the moment, I like selling the 2016 $45 puts for $4.10 as an initial net $40.90 entry (18% off the current price) – but I like waiting PATIENTLY even more. If they cross back over $50 and hold it, that's a good signal to get in, but never underestimate the ability of idiot analysts to extrapolate a short trend into a long one and scare people out of a perfectly good stock!
ED (6/3) is another boring utility stock near the bottom of it's range at $55. This one pays a $2.52 dividend but also don't have 2016 contracts yet.
You can sell their $55 calls for $2 and the $55 puts for $3 for net $50/52.50 with the same boring game plan but it's nice to have a few boring stocks in your portfolio. This one almost got away but then thought better of it.
EXC (8/29) - They just did a big dilution with 50M new shares issued, which was about 6% of the float and the dividend is $1.24 and I doubt they sold those shares to give back $60M in dividends so expect those to be lower along with earnings, of course, since the money they raised is for long-term projects. So, down the road – sure it's a nice stock to be in but, short-term, I think the only reason they PAUSED going down is because they hit the 200 dma at $31 (yesterday).
From $37 to $29.60 is 20% and 15% would be $31.45 so those are the lines to watch. They didn't complete the 20% move but blew through 10% and slowed but made 15% and a bit lower so 20% still a good target but, at the moment, held up by the 200 dma. Figure the $7.40 move would have the 20% bounce and that's $1.50(ish) to $31.10, so that's weak bounce support and another $1.50 is $32.60 and THAT is when they start to look like they are recovering.
EXC pays a nice 4% dividend, so that's worthwhile ($1.24/year) and we can buy the stock for $33.26 and sell the 2016 $32 puts and calls for $6.50 for net $26.76/29.38, which is a nice 13% off if assigned and 19.5% if called away at $32 plus the 4% dividend + 1% this year is 24.5% in exchange for promising to buy 2x of this stock for 13% off – nice work if you can get it!
FCX (5/28) is right at the 200 dma at $33.75 and the 50 dma is going to move above the 200, which is very bullish if they hold $33.50 (and notice the nice bounce today).
Long-term, people do use copper, so I like selling the 2016 $30 puts for $3.20 for a net $26.90 entry, which is 20% off the current price. To me, that's just free money, since I'm happy to own FCX at $30. So it makes a nice, bullish offset to a hedge. If you want to be more aggressive, you can add the $30/37 bull call spread at $3.15, that has 122% of upside if FCX moves up just 10% by itself but, combined with the short puts, you net a .05 credit and make $7.05 (14,100% on cash) if FCX is at $37 in Jan 2016.
They've popped a bit since our pick but only $1 so far. As with all our picks, we prefer the ones that get cheaper.
GSK (8/27) – Dividend just $1.04 (3.6%) for PFE vs $2.59 (5.3%) for GSK so GSK would have to be a lot worse than PFE to choose PFE and it's not. $48.62 is an excellent price and you can lower it further by selling the 2016 $47 calls for $3.80 and the $43 puts for $2.30 for net $42.52/42.76, which is 12% off worst case not counting the expected 5 payments of .65, which is another 7.6% – not bad for 16 months. Same goes for MRK, by the way – just doesn't make the relative cut.
GLL (8/27) – I'm starting to like them again (as a short) because gold is back down to $1,285. I'd rather catch a spike but we may not get another one to play.
We can play gold to head higher by buying the April $87/77 bear put spread for $4.30 and those can be offset with short ABX 2016 $17 puts at $2 for net $2.30 on the $10 spread.
HK (8/27) – is a nice, little E&P that we like to play when it's cheap. Zacks likes them and couldn't even find a reason for them to be underperforming by so much this year.
Last time we caught them at $3.50 though and that's not coming back but, at $5.62, we can sell the 2016 $5 puts for $1.30 and engineer a net $3.70 entry – it's like we didn't miss a thing!
HMY (6/3) is another beaten-down miner (it often is) and it's back to where we liked it last year. It's a good stock to play if you remember to get out when they go higher and don't let greed overwhelm you and make you forget why you got in (for a quick gain on a bounce).
People don't like our long-term trades because they think they won't make quick money but, as you can see from our trade reviews, they often make fantastic money in short periods of time AND you have much better downside protection. Making money with less stress is always a good thing. The company will make .18 per share this year, not a bad p/e if we knock the price down.
At $2.60, you can just buy the stock and sell the 2016 $2 calls for $1 and the $2 puts for .35 for a net $1.25/1.63 entry and that's $1 off (38%) the current price – nothing wrong with that. In fact, it's the best play but you COULD be super-aggressive and sell the $2 puts for .35 and buy the Jan $2/3 bull call spread for .45 and you're in for net .10 on the $1 spread that's 0.60 in the money (up 500% if it stays here) to start and your worst case is a reasonable net $2.10 entry (25% off).
Let's not forget HOV (5/13) at $4.63. They are a constant buy for us in large part BECAUSE we can sell the 2016 $4 calls for $1.40 and the $4 puts for .75, which drops the net to $2.48/3.24 and that's 30% off the current price as your WORST outcome!
HPQ (8/25) is not cheap, per se. At $38 they are fairly priced but we like the $3.73 earnings per $38 share (p/e 10), even if the growth is slow and the trick is that we don't have to pay $38 to benefit from this stock. We can PLAN on owning the stock for net $29.60 (22% off) by selling the 2016 $32 puts for $2.40. TOS says the net margin on the trade is $2.20, so it's a very efficient use of margin (setting some aside to bargain-shop).
That's a fine entry and we can be happy with it or we can be more aggressive by adding the 2016 $32/40 bull call spread at $4 and then we are in the $8 spread for net $1.60 with no additional margin required and now our upside potential goes from 100% (on any finish over $32 with the short puts alone) to a potential 400% ($6.40 profit) if HPQ holds $38 or higher through Jan 2016.
IBM (5/20) has been holding it's 200 dma at $182.50 and I like them here for a long. I especially like that you can sell the 2016 $160 puts for $9 to net in at $151, because who doesn't want to own IBM for $151 (the 2011 low)? So that makes a great bullish offset with a net $16 margin or you can be aggressive and add the 2016 $160/185 bull call spread at $14 for net $5 on the $25 spread that's $24.50 in the money to start. Definitely one to add to our Buy List should it improve – if I wasn't very bearish at the moment, I'd add it today (probably 5 to own $82,500 of it long-term in one of our $500KPs)
Notice they dipped down to EXACTLY $182.50 and now are bouncing back. In this particular case, we now look to see if it makes a strong or weak bounce, per our 5% Rule™. Since the drop was from $200 (and yes, I know we didn't actually hit it, but it's the goal) then we take the $18 drop and call a weak bounce $3.60 to $185 (past it) and a strong bounce $188.50 (not an exact science) and we won't be too impressed until it crosses back over that line.
IGT (5/13) confuses me. They just had good earnings yet they are being treated like dirt because they are in the midst of restructuring. We love it when we can take advantage of a situation by simply being more patient than the current investors!
IGT does pay a .44 dividend and they have expensive options so perfect for a buy/write where we buy the stock for $12.57 and sell the 2016 $10 calls for $3.40 and the $13 puts for $2.80 for net $6.37/9.19 so our WORST case is owning 2x at $9.19, which is 27% off the current price and that makes the .44 dividend 7% while we wait to see if we get called away at $10 for another $3.63 (57%) and, of course, we need to be over $13 to realize the full profit.
If IGT were put to us with the stock at $11, for example – we'd still be up $3.63 on the first batch (which still would have been called away at $10) and our new 1x position would be $9.37 less the .88 dividend we collected over 2 years. Not bad for a bad outcome…
IRBT (5/13) is our Stock of the Century and I can't believe it's back to $33.15. They don't have Leaps so we just grind the price down by selling Dec $30 calls for $6.60 and 30 puts for $3.45 to drive the net down to $23.10/26.55, which is a very nice, additional 20% discount. I was right not to believe $33.15, though it did go a bit lower before recovering.
ISRG (5/20) is one we always like when it's cheap and they're back at $364.40 and one of the best reasons to enter a bullish play is because you have a very obvious line at which to get out. $350 is an obvious line. The 200 dma is actually at $400 and the 50 dma, at $415 is going to death cross soon (unless ISRG rockets back over $400), so no hurry on this one but well worth watching. 2016 $300 puts are $28 for a net $272 entry and that's another 25% down from here. This one is drifting up already – a very likely official play for next week.
JDSU (5/20) got crushed on earnings but have held up well since. They missed estimate AND lowered guidance but it's not their fault as the Telcos simply delayed spending on fiber last Q and – THE WEATHER! This is kind of like when I put my foot down on ALU a couple of years ago – I don't care how bad they look now, these are the guys who wire up the internet and, eventually, there's a Trillion Dollars worth of fiber that needs to be laid around the World. The 2016 $10 puts can be sold for $1.55 for net $8.45, which is 22% off the current $10.90 – it's a nice way to play them to start.
KBH (5/13) is the first builder I've liked since HOV (which I still love at $4.63). Earnings were .41 vs -.76 last year's Q1 yet they are not being rewarded for it, probably because their debt/equity ratio is up near 4, but that's mostly because they wrote off most of their inventory, the debt itself is just $2.2Bn and serviceable under current cash flow. When you buy a builder at this stage in the cycle – you are essentially giving your money to a professional to invest in housing.
KBH is solid and, because they've taken massive losses in the past 5 years, it will be 5 years before they have to pay any taxes on earnings – that's nice too. No dividend (.10) means no reason to own the stock and, because they look scary, we can sell the 2016 $13 puts for $1.60 and use that $1.60 to buy the $!5/25 bull call spread for $2.90 for net $1.30. So we effectively own KBH for $16.30, which is what the stock cost now but, if it drops all the way below $13, we only have a net $14.30 cost if it's put to us. So $2 of cushion for free and we make 100% of the upside between here and $25. We can also potentially sell some short calls along the way if they move up a bit more.
This one is on the move, another top candidate for next week.
LGF (8/27) – Not cheap at $32.50 but growing really fast and all these companies competing for content and bidding up prices is great for people like LGF, who have 15,000 movies and currently air 30 TV shows including Nurse Jackie, Weeds, Mad Men… so they have their finger on what people like now – and their movies (Hunger Games, Ender's Game, Expendables) are pretty good too. Movies are, however, a crazy business so it's good to go light and wait for the mistakes to go long. Still, the volatility is assumed and you can sell 2016 $28 puts for $3 to generate a $25 entry – 23% off.
LULU (8/27) – Another big winner we wisely took off the table and here they are again at $41.50. Same everything about the company but a lot more competition for yoga-wear but LULU is high-end and shouldn't be compared to other stores that are doing me-too stuff. GPS is getting a lot of excitement for getting into this space (Athleta) but imagine yourself a yuppie housewife faced with the choice of going into a lovely, peaceful LULU store (only 250 in the World) or elbowing kids out of the way at the Gap and standing in line waiting to try things on – without even a free herbal tea. Is that really worth saving a few bucks? The 2016 $37.50/50 bull call spread is $5.40 and you can sell the $32.50 puts for $3 for net $2.40 on the $12.70 spread that's starting out $4 in the money – not bad. This one is definitely going in.
MAT (8/29) - Barbie sales down 6% ($1.2Bn) but American Girls is up 11% at $632M and other girl dolls are up 25% at $1.3Bn so more than making up for lost Barbie revenues. Like AAPL, MAT is cannibalizing their own sales with new products – can't be helped as there's a finite amount of girls and money and, like AAPL, analysts don't bother looking at the broader story and focus on one click-getting headline to back their entire premise.
MAT does have 2016s and they do pay a 4.3% dividend ($1.52) and they've been buying back 5% of their own stock this year and last so worth owning the actual stock at $34.50 and sell the 2016 $33 calls for $3.70 and the $30 puts for $2.05 for net $28.75/29.38, which is a 15% discount if put to you and a 15% profit if called away plus $1.90 of dividends is another 6.6% for 21.6% at $33 on round one.
They are on the prowl to merge with NEM (5/28) and the deal is off at the moment but there's an expectation of $1Bn in synergistic savings per year (the idea is they would keep all the low-cost mines and sell off the rest), so it might come back to the table. NEM is as out of favor as ABX at $22.41 and we can pick up the 2016 $20/25 bull call spread for $2.20 to net in at $22.20 and, if they get bought for $25 – it's a quick double!
NLY (6/7) is another REIT favorite of ours and pays a lovely $1.20 dividend. It's certainly not cheap at the moment but not terribly expensive either. For an entry, we can't argue with selling the 2016 $12 puts for $2.35 to net in at $9.65 (17% off) because it pays more than the dividend (since we missed 2 quarters this year) over an 18-month hold.
If we do get assigned, we get a cheap entry and, if they crack over $12, we could still buy the stock and sell the 2016 $12 calls (now .50) for perhaps 0.75 and then we'd be in the stock at net $8.90/10.45 and the anticipated $1.80 dividend would drop us to $7.10/9.55 so, either way we net a $9.55(ish) entry – it's just a question of whether we get 1x or 2x and we'd only be in 2x AFTER they break over $12. Clever, isn't it?
NTAP (5/20) has earnings tomorrow (as we can see, in retrospect, they went well) and expectations have been lowered to the point where they seem a bit silly. They beat by 3.5% last Q but gave crappy guidance but they've already laid people off and cut costs so, even if they miss this Q, I'll still like them later. In this case, I'd just sell the 2016 $30 puts for $3.40 for a net $26.60 entry, which is 22% off the current price and, if they do miss and go down (but we think they'll come back) THEN we can add a bull call spread and, if not, then it's just fee money. Let's sell 5 for $1,700 in the STP and we'll push it to the LTP if they fail. Those puts are now $2.70 ($1,350) for a very quick $350 (20%) gain – so far.
That's a very important point to make – we don't have to make short-term plays to make excellent short-term profits. We were right about NTAP's earnings and made 20% in a few weeks but, since we took a nice, conservative LONG-TERM entry, had we been wrong, we still had plenty of cushion (22%) and a nice, cheap entry down the line. There's no need to take big risks to make REASONABLE returns (assuming we can agree that 20% in less than a month is reasonable).
I'm warming up to the NYT (8/29) at $12. I think it's best to go with the April $11/13 bull callspread at 0.90 and just looking for the $1.10 gain (122%). If NYT goes lower, then I'd like to sell $11 puts (now .75) for $1 or more and maybe use that money to pay for a roll longer and lower (strikes not yet available past April).
The Company had an operating profit of $16.5 million in the second quarter of 2014 compared with $46.2 million in the same period of 2013, with the decline mainly resulting from investment spending associated with the Company’s strategic initiatives. Adjusted operating profit (defined below) was $55.7 million in the second quarter of 2014 compared with $70.7 million in the second quarter of 2013.
PFE (5/20) is cheap at $29.42 and they pay a $1.04 dividend but we can blow that off and sell the 2016 $30 puts for $3.80 and use that money to buy the $23/30 bull call spread for $4.40 for net 0.60 on the $7 spread that's $6.39 in the money to start.
If all goes well, it's a 1,066% profit in 18 months on the cash and TOS says the margin on the put side is just $6, so margin-efficient too! If you REALLY want to own 500 shares of PFE at $30.60 in 2016 ($15,300), then 5 of these spread contracts cost just $300 in cash, $3,000 in margin and pays $3,500 if PFE is over $30 in Jan 2016. That one is worth putting 10 in the Income Portfolio.
PNW (6/3) is a nice 4% dividend pays ($2.27) and, if they had 2016 options, I'd like them for the butterfly portfolio because they are so boring.
Interestingly though, you can buy the stock for $55 and sell the Jan $55 calls for $2.75 and the $55 puts for $3.20 for a net $49.05/52.03 entry. It's nothing too exciting but it's a nice stock to whittle away the basis of for a long-term hold in your portfolio.
RIG (5/20) is still cheap at $41.47, off the lows at $38. The 2016 $35 puts can be sold for $3.55 for a net $31.45 entry and that's nice by itself and makes a nice offset to a bear trade. Net margin on the short puts is $3.50 so it's a 100% return on margin – very efficient. It can be paired with the $40/50 bull call spread at $3.20 for a net .35 credit and your worst case is owning RIG for net $35.35 (15% off) while the upside is up to $10.35 at $40 for a 2,957% return on your cash. These guys are moving up fast, if they go over $43 it might be a good idea to jump in.
RRD (5/13) pays a fat $1.04 dividend and the stock is down to $15.85 so you know I like a buy/write for this one. We can buy the stock and sell the 2016 $15 calls for $2.35 and the $15 puts for $2.70 and that's net $10.80/12.90 and that makes the $1.04 dividend 9.6% while we wait to get called away with another 38% profit. Worst case is owning 2x at $12.90, which is 19% off the current price. As you can see, this one bucks like a bronco but I'm comfortable with the bottom call we made on the 13th.
SHLD (5/28) – is still good for at least $5Bn net of debt, possibly higher depending on how well their break-up sales go. It seems to me that Eddie tanked the books and the CC for the Q - of course they had lower sales, they spun off Land's End and we got $10 a share for them – why the stock didn't drop $10 when it happened is the interesting thing. With LE, last year's average was $40, without LE, we're at $35 and those who had SHLD last year, have 30 shares of LE AND $2.36 in cash for each 100 shares of old SHLD. LE is now $35 too!
So I do like SHLD long down here on the same breakup value and land value story we've always had. With the recent panic, you can sell the 2016 $25 puts for $5 and that buys the 2016 $30/45 bull call spread at $6 for net $1 on the $15 spread that's $6 in the money to start. I'd stop out of the short puts below $32 (around $6) and reload at a lower strike when it settles down.
TASR (5/13) is shorter-term, since it's our Stock of the Decade and they've dropped off 1/3 from their $20 high so we like them again at $13.62.
They do have Leaps so we can sell the 2016 $13 puts for $2.50 and the $15 calls for $3.20 for net $7.92/10.46, which gives us another 22% discount on this one.
TEX (5/20) is one we used to like in the teens but they'll never see the teens again, now $39.80. It's a building and infrastructure play and I know from trying to raise capital for a real estate venture last year that NO ONE is going to be breathing down their necks for a long time.
In fact, they've been able to buy up a lot of their competition and pick up equipment from failed competitors for pennies on the Dollar in the down market. Last earnings indicated they were backlogged on orders and the 200 dma is $38 and I doubt they go lower than this.
They don't pay a dividend (0.20), so no reason to own them but you can sell the 2016 $35 puts for a very nice $5.30 for a net $29.70 entry and leave it at that or add the $30/40 bull call spread at $5.50 for net .20 on the $10 spread that's almost 100% in the money. This one is too good – gotta pull the trigger on 5 in the Income Portfolio! Another well-timed, quick winner!
UBNT (5/28) was Wombat's idea from yesterday and we'll add them as a Tech pick. We like the 2016 $45/55 bull call spreads at $2 and they aren't going to get any cheaper (relatively) so we may as well get 10 of those in the Income Portfolio for $2,000 so we can keep an eye on them.
IF the stock goes lower, AND we still like them, THEN we might sell the 2016 $20 puts, which are currently $2.50 – maybe for $3+. Wow, the ones we already added are all doing quite nicely…
WEN (5/13) has taken a nice dip but they just put in solid earnings and $8.37 is a nice discount off the $10.22 high. I think $10 was a bit silly but so is $8 and we can be conservative with these guys and skip the .20 dividend and just sell the 2016 $10 puts for $2.80, which is net $7.20 so another 20% off from the current price and TOS says the net margin is just $1.60 so super-efficient return of 175% on margin if you're willing to own WEN for net $7.20 and they get back over $10 in 20 months. The nice thing about this is that anything over $7.20 is still a profit.
WFM (5/13) I have not liked for ages but $39.43 finally gets their p/e into the low $20s and they are moving into the UK and, as we've discussed before, they are merely getting squeezed by rising food costs they haven't passed on to customers yet.
This one is easiest played by just selling puts and you can get $3 for selling the 2016 $33 puts and that gives you a net $30 entry, another 25% down from here. TOS says net margin is $3.30 so almost 100% return on margin for promising to buy WFM for 25% less than it's trading for now – not too shabby (added at $3.45 to our Income Portfolio along with the 2016 $35/45 bull call spread at $3.65 for net 0.20 and already $2.40 – up 1,100% on cash!)
So that's actually 44 stocks we can choose from for our Long-Term Portfolios! It's going to be a very exciting end to the year and we'll kick things off on Tuesday, when we'll look to add our first few official entries.
Ideally, you can always refer to this list and see what's on sale on any given day – giving us quick ideas of places we can take advante of when there's a nice dip.