Top Trades for Tue, 26 Nov 2019 10:48 – X and Low P/E Stocks I Like


    Different/StJ – If you accept the premise that "safe" investments are capped at 3% and not 5% or 6%, then stocks become a more valuable alternative though I would argue that bonds are 3% because inflation is 2% (it is for rich people) and, therefore, there is still no reason to risk valuable cash in the uncertainty of a market that COULD lose your money.  

    It's very, VERY hard for me to justify paying more than 20x for stocks when there are PLENTY of stocks trading well below that like:  MT, TEVA, FCAU, DELL, VIA, AAL, VALE, F, SFBTY, ING, SAN, MFUG, LNC, PUK, BCS, MU, FCX, PRU, SNP, LEN, KHC, UBS, CBS, GS, COF, MET, MFC, LYG…  PLENTY of perfectly good mid to large-cap stocks trading at reasonable prices (some on the Watch List, some on deck and still being considered). 

    If there were NOTHING to buy cheaply, THEN I would consider paying 20x for a retailer or restaurant but ONLY if there are no alternatives – and there still are.  Enough to last the next 2-year cycle before I throw in the towel and pay these insane prices….

    On the smaller cap side, by the way, there's also:  X, M, CLF, MYL, ECA, ADS, TECK, BHF, STLD, SVC, XEC, NRZ, GPS, LB, NWL, HUN, GT, UTHR, AUO, TWO, AGNC, PK, MTG, BSM, SLM and HFC.  

    PLENTY to keep us busy.  

    X is back at $13.80 and you can buy the stock but it only pays an 0.20 dividend and they are not going to make any money so I'd set it up as a call-selling play like this:

    • Buy 40 X 2022 $10 calls for $6 ($24,000)
    • Sell 30 X 2022 $17 calls for $3.20 ($9,600) 
    • Sell 20 X 2022 $12 puts for $3.30 ($6,600) 
    • Sell 20 X March $14 calls for $1.60 ($3,200) 

    That's net $4,600 on the $28,000 spread that's $16,000 in the money at the moment and, of course, I'm assuming we'll be able to roll the 10 extra short calls out of trouble over time and, if not, worst case is we buy 10 more long calls ($6,000) to cover them so no real issue there, right?  I certainly don't think the puts are aggressive and we collected $3,200 selling 115 days out of 787 so at least 5 more sales to go to generate another $17,000 while we wait to make $23,400 on the spread – seems silly not to add that to our Butterfly Portfolio (which I am about to review).

    VIX/StJ – Worrying is so 2018…