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Top Trades for Tue, 09 May 2017 10:36 – SLW and ABX

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Top Trades for Tue, 09 May 2017 10:36 – SLW and ABX
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ABX/Rookie – Well we already have plenty but, as a new trade idea:

  • Sell 10 ABX 2019 $15 puts for $2.20 ($2,200) 
  • Buy 20 ABX 2019 $13 calls for $4.80 ($9,600) 
  • Sell 20 ABX 2019 $20 calls for $2 ($4,000) 

That's net $3,400 on the $14,000 spread with $10,600 (312%) upside potential at $20 and worst case is owning 10 at net $18.40, which is a bit high but the idea is that, if gold totally tanks, you only have 10 so you can do a 2x roll to maybe the 2020 $10s  (the 2018 $20 puts are $4 in the money at $4.50 and the 2019 $15 puts are $2.20 so 2x roll drops you $5).  

SLW/Pstas – They don't own mines, they stream silver contracts so, kind of like an MBS REIT, they have about 3 years worth of silver contracts (usually at discounts) to buy and then they sell at spot.  So, the theory is that all their contracts are now $20 or less and we don't see silver going much lower and anything higher is a huge bonus.  Keep in mind, they only lost money in 2015 – even on that huge drop.  

Year End 31st Dec 2011 2012 2013 2014 2015 2016 2017E 2018E CAGR / Avg
Revenue $m 730 849.6 706.5 620.2 648.7 891.6 886.6 937.4 +4.1%
Operating Profit $m 561.1 600 387.7 202.9 -157.3 223     -16.9%
Net Profit $m 550 586 375.5 199.8 -162 195.1 287.3 331.4 -18.7%
EPS Reported $ 1.55 1.65 1.05 0.56 -0.41 0.45     -21.8%
EPS Normalised $ 1.55 1.65 1.05 0.68 0.22 0.56 0.66 0.75 -18.4%
EPS Growth % +249.1 +6.5 -36.0 -35.6 -67.2 +151.4 +17.9 +13.2  
PE Ratio x           34.9 29.6 26.2  
PEG x           1.95 2.25 3.56
 

SLW/Dsheara – Yes, I still like them and ABX.

 As a new play on SLW I'd go with:

  • Sell 10 SLW 2019 $17 puts for $2.50 ($2,500)
  • Buy 20 SLW 2019 $17 calls for $4.80 ($9,600)
  • Sell 20 SLW 2019 $22 calls for $2.75 ($5,500) 

That's net $1,600 on $10,000 worth of long spreads so potential for $8,400 (525%) profit and worst case is owning SLW at net $18.60 – a bit lower than it is now (and look how much you can sell calls for!).  Not an aggressive play, break-even is $18.60 and everything above is 2x profit.