Continue reading Chasing Value: Ten stocks for 2010 -- Part 4

Chasing Value: Ten stocks for 2010 -- Part 4 originally appeared on BloggingStocks on Wed, 18 Nov 2009 16:40:00 EST. Please see our terms for use of feeds.

For those of you who are able to trade options, I have been writing more and more about naked puts, "selling to open" stock options that I have been doing all year with great returns due to an overabundance of fear.

Yesterday I reviewed one example in Chasing Value: GE -- maybe not eating out of trash cans after all, and today I review some of my favorite ways to make money and improve my portfolio.

Let me start with United Parcel Service Inc. (NYSE: UPS), a company with a great balance sheet, strong management, and trading 29% off its 52-week high, about where I sold it last year. I bought it earlier this year at the bargain basement price of $44, and now wished I had bought more.

Continue reading Chasing Value: Favorite trades -- UPS

Chasing Value: Favorite trades -- UPS originally appeared on BloggingStocks on Tue, 30 Jun 2009 12:00:00 EST. Please see our terms for use of feeds.

Continue reading Chasing Value: Has BNI become 'Berkshire' Northern Santa Fe

Chasing Value: Has BNI become 'Berkshire' Northern Santa Fe originally appeared on BloggingStocks on Tue, 17 Feb 2009 12:25:00 EST. Please see our terms for use of feeds.

Continue reading Investor fear puts me 'naked' on Wall Street

Investor fear puts me 'naked' on Wall Street originally appeared on BloggingStocks on Tue, 17 Feb 2009 11:30:00 EST. Please see our terms for use of feeds.

Yahoo! (NASDAQ: YHOO) yesterday posted its lowest price in nearly five years. The stock moved to $17.75, down from a 52-week high of $34.08.

The Wall Street Journal pushed the idea that this was an options play. "Trading in Yahoo options leapt to four times the normal level as investors picked up 168,000 calls that allow them to buy the company's stock." In other words, some traders are willing to gamble that the shares will go up.

But, they won't go up. There is growing evidence that marketers prefer search internet ads to display advertising. Yahoo! sells a great deal of display inventory and is a distant second to Google (NASDAQ: GOOG) in search. Some of that may change as Yahoo! begins to use the Google system to create its search results.That may not offset the fact that Yahoo! probably has as much display advertising availability as any company in the world.

Because Yahoo! has shown it is unwilling to make major cost cuts, a flattening of its revenue growth would be a disaster for its investors. The firm's year-over-year sales improvement is already barely above 10%. What had been a growth stock three or four years ago has now become a buyout gamble. Investors still hang on to some hope that Microsoft (NASDAQ: MSFT) or a large media company will make an offer for the portal company.

That means that Yahoo! still carries a "takeover" premium, which begs the question of where the shares might trade at the end of the year, if there are no offers. Investors are gambling that there is a 30% chance that Yahoo! will be bought, if it is not, the stock heads toward $13.

Douglas A. McIntyre is an editor at 247wallst.com.

As Yahoo! hits a five-year low, bets about direction increase originally appeared on BloggingStocks on Fri, 05 Sep 2008 10:00:00 EST. Please see our terms for use of feeds.

Yahoo (NASDAQ-YHOO) closed at $28.43. Yahoo is scheduled to report earning on April 22. The Microsoft (NASDAQ-MSFT) deadline for moving forward with a hostile takeover of Yahoo is April 26. Microsoft announced on Jan. 31 an offer for Yahoo payable in $31 cash, or 0.9509 per share. Yahoo May option implied volatility of 55 is above its 26-week average of 40, according to Track Data, suggesting larger price movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Option Update: Yahoo volatility Elevated into EPS & MSFT buyout efforts originally appeared on BloggingStocks on Mon, 21 Apr 2008 12:02:00 EST. Please see our terms for use of feeds.

Continue reading Financial executives sitting on worthless options

Financial executives sitting on worthless options originally appeared on BloggingStocks on Thu, 20 Mar 2008 16:53:00 EST. Please see our terms for use of feeds.

CEOs paid in stock options perform worse, study says originally appeared on BloggingStocks on Tue, 16 Oct 2007 18:04:00 EST. Please see our terms for use of feeds.

Hewlett-Packard settles largest-ever stock options backdating lawsuit originally appeared on BloggingStocks on Tue, 16 Oct 2007 10:14:00 EST. Please see our terms for use of feeds.

Stocks moved mildly lower today taking a break from the bullish buying over the last two days. This is not really a bad sign, after all the S&P 500 gained 3.5% Tuesday and Wednesday so losing 0.67% today still leaves it up 2.8% since the Fed cut. September equity options expire tomorrow so we may see some some extra volatility gong into the end of the week.

The NYSE had volume of 3.0 billion shares with 978 shares advancing while 2,331 declined for a loss of 34.43 points to close at 9,936.47. On the NASDAQ, 1.6 billion shares traded, 1,131 advanced and 1,864 declined for a loss of 12.19 to 2,654.29.

Circuit City Stores (NYSE: CC) dropped $1.90 (-18%) to $8.67 on earnings. Silver Wheaton Corp (NYSE: SLW) rose $0.99 (8%) to $14.02. D R Horton Inc (NYSE: DHI) fell $1.11 (-7%) to $14.08. KB Home (NYSE: KBH) fell $1.95 (-7%) to $27.37. CKE Restaurants Inc (NYSE: CKR) fell $0.99 (-6%) to $15.55 on $.15 earnings per share.

In options there were 5.8 million puts and 7.7 million calls traded for a put/call open interest ratio of 0.75. The most active options lists were almost completely filled with ETF and index options. S&P Depositary Receipts Trust ETF (NYSE: SPY) saw very heavy volume on the September 150 calls (SYHIT) with over 643,800 options trading. The SPY September 149 calls (SFBIS) also had a lot of activity moving 300,400 contracts. Financial Sector SPDR ETF (NYSE: XLF) were again active; the September 33 calls (XLFIG) with over 171,900 options trading. PowerShares QQQ Trust ETF (NASDAQ: QQQQ) saw heavy volume on the March 45 puts (QQQOS) with over 199,800 options trading and the March 48 puts (QQQOV) moved 180,500 options trading.
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Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Thursday Market Rap: CC, SLW, DHI, KBH, and CKR originally appeared on BloggingStocks on Thu, 20 Sep 2007 18:48:00 EST. Please see our terms for use of feeds.

Altria Group (NYSE: MO) is up $1.35 to $70.54 on a report of a spin-off of international operations.

Today, so far Altria Group moved 23,300 contracts on the September 70 calls and traded 4,700 contracts on the September 75 calls. In options there have been 59,605 contracts traded; of them 13,432 contracts are puts while 46,173 contracts are calls. For all options there are 297,119 put contracts open and 820,321 call contracts open. This means that the put/call open interest ratio for MO is 0.36. With so many more calls than puts being traded it also shows that speculators expect the stock to rise.

Call option activity is generally an indicator of bullish speculation on a stock. Call options give the buyer the right to purchase the stock at a set price. Each option contract is represents an interest in 100 shares of the underlying stock. Some of this call option activity may be people expecting a little boost from the spin-off. Altria's stock has moved from around $57 to $72 over the last year and is now trading near the high end of that range.

Looking at key metrics, Altria Group is solidly in line with its competitors in the industry. MO employs 175,000 people and had revenue of 71.22 billion with a gross margin of 46.6% and a net operating margin of 25.4%. British American Tobacco (NYSE: BTI) employs 97,000 people and had revenue of 19.49 billion with a gross margin of 71.65% and a net operating margin of 31.1%. Reynolds American (NYSE: RAI) employs 7,500 people and had revenue of 8.7 billion with a gross margin of 44.42% and a net operating margin of 26.28%. Altria's profit margin is of 17.1% is healthy and it has a high dividend yield is at 3.8%.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Altria sees heavy option activity with spin-off report originally appeared on BloggingStocks on Mon, 27 Aug 2007 16:30:00 EST. Please see our terms for use of feeds.

It happened at Microsoft (NASDAQ: MSFT), and, to a lesser extent, at Yahoo! (NASDAQ: YHOO). Key employees are at the company for a few years. Their stock options vest, and the shares are longer doubling ever year. So, they exercise their options, pick up a few million dollars, and move on.

Google (NASDAQ: GOOG) is beginning to face the "Microsoft" problem now, according to The Wall Street Journal. As the newspaper points out, stock options granted in 2003 have an average exercise price of $.49 and the shares now trade well north of $500. In 1990, Microsoft's stock was $1. By 1999, it was over $58. A lot of people made money, but, as the price growth disappeared, so did key employees.

Key members of Google's staff can now leave with significant fortunes and go to start-ups which give them a larger role and a new set of financial incentives.

Google could learn something from Microsoft, but a solution would be expensive. The search company could grant key employees large blocks of restricted stock which would vest over several years. There would be a financial consequence for the company's P&L, but the move may be critical to keeping talent.

Even if it throws around more money, Google is faced with the fact that someone with $10 million may want to move on to another challenge, even if that person could make another $5 million by staying.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Google's brain drain originally appeared on BloggingStocks on Thu, 28 Jun 2007 09:00:00 EST. Please see our terms for use of feeds.

Family Dollar (NYSE: FDO) has settled shareholder lawsuits relating to the backdating of stock options issued to executives at the company. Under the terms of the settlement, Chairman and Chief Executive Howard Levine, President and Chief Operating Officer R. James Kelly, board member George Mahoney and executive C. Martin Sowers will give up a total of 210,000 stock options.

The company will also institute corporate governance reforms including the adoption of a majority-vote policy for uncontested elections of directors and the election of two additional independent directors.

Here's what bothers me: The company will be taking a charge of $5.7 million related to the settlement, including $3.5 million to cover the attorney's fees of the shareholders who brought the lawsuits.

This is my question: Given that the company clearly had ineffective internal controls that allowed top executives to receive backdated stock options, why should the company's shareholders have to pick up the tab for the legal fees? CEO Howard Levine made more than $3.1 million last year. Since he and other executives and directors were the ones responsible for options backdating, why shouldn't they pay legal fees?

Family Dollar to take $5.7 million charge related to shareholder lawsuits -- That'll show em'! originally appeared on BloggingStocks on Mon, 25 Jun 2007 09:56:00 EST. Please see our terms for use of feeds.

Cleveland-Cliffs (NYSE: CLF) -- calls bid up aggressively on heavy volume on buyout chatter. CLF, a producer of iron ore pellets, is recently up $1.75 to $75.30 on unconfirmed take over chatter. CLF has a market cap of $3 billion. CLF is expected to file its 1st quarter 2007 form 10-Q in early June. CLF May 75 calls have traded 105 times on transaction volume of 1,712 contracts above its open interest of 935 contracts. CLF May 75 calls are bid $1.70 above its theoretical value of $1.05. CLF May 80 calls have traded 69 times on transaction volume of 1,818 contracts above its theoretical value of 626 contracts according to Track Data. CLF May 80 calls are bid 45 cents above its theoretical value of 04 cents, suggesting hedging for upside risks.

Mosaic Co. (NYSE: MOS) -- volatility & volume Spikes on buyout Speculation. MOS, a producer & marketer of concentrated phosphate and potash crop nutrients, was spun out of Cargill in 2004. MOS is recently up $1.16 to $30.63. MOS is frequently mentioned as a take out target of Potash Corp. (NYSE: POT). MOS call option volume of 4,791 contracts compares to put volume of 643 contracts. MOS June option implied volatility of 48 is above its 26-week average of 36 according to Track Data, suggesting larger for upside price risks.

Option volume leaders today are: Dendreon Corp. (NASDAQ: DNDN), Advanced Micro Devices (NYSE: AMD), Apple Inc. (NADSAQ: APPL) and Mylan Labs (NYSE: MYL).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 5-14-07: CLF, MOS spike on speculation originally appeared on BloggingStocks on Mon, 14 May 2007 13:16:00 EST. Please see our terms for use of feeds.

Rackable Systems (NASDAQ: RACK) implied volatility not confirming Dell (NASDAQ: DELL) speculation. RACK, a provider of servers and storage products, is recently up .54 to $12.49. Market speculation is circulating that Dell is interested in RACK. RACK June option implied volatility of 51 is below its 26-week average of 57 according to Track Data, suggesting decreasing price risk.

Lyondell Petro (NYSE: LYO) volatility stays Elevated as Occidental Petroleum (NYSE: OXY) says it will sell LYO Holdings. LYO a global manufacture of chemicals, plastics and fuel products is recently up $2.91 to $36.00. OXY announced plans to sell all of its 20,990,070 holdings in LYO. LYO June option implied volatility of 34 is above its 26-week average of 31 according to Track Data, suggesting larger risk.

Option volume leaders today are: Dendreon (NASDAQ: DNDN), Advanced Micro Devices (NYSE: AMD), Amgen Inc. (NADSAQ: AMGN) and Lyondell Petro (NYSE: LYO).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 5-11-07: RACK implied volatility not confirming DELL speculation originally appeared on BloggingStocks on Fri, 11 May 2007 12:55:00 EST. Please see our terms for use of feeds.

Countrywide Financial Corp. (NYSE: CFC) implied volatility Elevated as CFC share price retraces.

• CFC, the largest U.S. home mortgage lender, is recently up $1.44 to $39.92 on renewed buyout chatter.
  
• CFC May option implied volatility of 48 & June at 41 is above its 26-week average of 34 according to Track Data, suggesting larger price risks.

Urban Outfitters Inc. (NASDAQ: URBN) implied volatility suggests increased risk into EPS.

• URBN, a lifestyle merchandising company, announced 1Q same store sales fell 2%.
  
• URBN will report EPS on 5/10. BUCK has an accumulate rating on URBN with a $31 price target.
  
• URBN May option implied volatility is at 53, June is at 45; above its 26-week average of 42 according to Track Data, suggesting larger risk.

Option volume leaders today are: Dendreon Corp. (NASDAQ: DNDN), AK Steel Holding Corp. (NYSE: AKS), Motorola Inc. (NYSE: MOT) and Cisco Systems Inc. (NYSE: CSCO).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 5-8-07: Urban Outfitters volatility increases before earnings originally appeared on BloggingStocks on Tue, 08 May 2007 15:02:00 EST. Please see our terms for use of feeds.

Color me a cynic, but I have a hard time feeling the sincerity in Steve Jobs' promise to make Apple (NASDAQ: AAPL) a more environmentally friendly business, with initiatives like eliminating certain toxic substances from its products and promoting recycling. Jobs issued a five-page memo discussing the new, greener Apple.

If this announcement had come a year ago, in a time when Apple wasn't in the midst of an options-backdating scandal with accusations flying all the way up to Mr. Jobs, I'd applaud the company's efforts. In a way, I still do. But it also seems like a diversionary tactic to draw attention away from governance scandals surrounding the company.

Portfolio.com wrote that, "As Home Depot and Wal-Mart have recently discovered, announcing green initiatives in the face of bad news is a great way to divert media attention from things like $100 million CEO pay packages and ongoing battles over worker wages and benefits."

The magazine also points out that Al Gore's presence on the board of directors may have contributed to the decision, although Gore recently backed the board in opposing shareholder proposals that would have called for more stringent environmental standards at the company.

Interesting timing on Apple's green initiatives originally appeared on BloggingStocks on Fri, 04 May 2007 18:50:00 EST. Please see our terms for use of feeds.

Wal-Mart's CEO Earned 6.3 Million in 2006

That was the headline for today's Wall Street Journal's coverage of Wal-Mart (NYSE: WMT) CEO Lee Scott's pay package. The piece goes on to say that "Wal-Mart Stores Inc. Chief Executive Lee Scott received base pay, bonuses and perquisites of $6.3 million last fiscal year in addition to grants of restricted stock and options valued at $17 million, the retailer disclosed in its proxy filing yesterday."

Here's the thing: If Lee Scott earned 17 million dollars in restricted stock and options, why does the headline say that he earned 6.3 million? The Federal Accounting Standards Board and SEC now require companies to expense stock options when they are issued, and this make sense. As Warren Buffett said "If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? If expenses shouldn't go into the calculation of earnings, where in the world should they go?"

So I ask the Wall Street Journal: Why not report Mr. Scott's earnings the same way the company reports them in its proxy statement?

How much did Wal-Mart's CEO really earn? originally appeared on BloggingStocks on Fri, 20 Apr 2007 18:30:00 EST. Please see our terms for use of feeds.

Amazon.com, Inc. (NASDAQ: AMZN) May implied volatility at 43, July at 33; suggests near term Risk. AMZN is recently trading at $45.08. AMZN will report earnings on 4/24. AMZN May option implied volatility of 43 is above its 26-week average of 37 according to Track Data, suggesting larger price fluctuations.

US Steel (NYSE: X) option implied volatility Flat at 40 into EPS as X near Record High. X is recently down .93 to $107.15. X will report EPS on 4/24. X May option implied volatility of 40 is near its 26-week average according to Track Data, suggesting non-directional price fluctuations.

Merck (NYSE: MRK) implied volatility suggests non-directional risk into earnings and outlook. MRK will to report earnings on 4/19. MRK over all option implied volatility of 20 is near its 26-week average according to Track Data, suggesting non-directional price fluctuations.

Option volume leaders today are: Yahoo! Inc. (NASDAQ: YHOO), Johnson & Johnson (NYSE: JNJ) and Intel Corp. (NASDAQ: INTC).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 4-17-07: AMZN -- near-term Risk into earnings originally appeared on BloggingStocks on Tue, 17 Apr 2007 13:42:00 EST. Please see our terms for use of feeds.

Ipsco Inc. (NYSE: IPS ) -- volatility up; indicates more Risk; release of discussions of acquisition. IPS, a low cost producer of energy tubular sans steel plate, is recently up $15 to $156.19. IPS says "it is currently in discussions that could lead to a potential acquisition of the company." IPS has a market cap of $6.9 billion with long-term debt of $879 million. IPS reported 2006 total revenue of $3.7 billion. IPS call option volume of 4,751 contracts compares to put volume of 1,506 contracts. IPS April option implied volatility is at 47, May is at 43 above its 26-week average of 38 according to Track Data, suggesting larger price risks.

Raser Technologies (AMEX: RZ) -- option implied volatility Elevated on agreements win; RZ rallies 19%. RZ has pending patents and proprietary intellectual property covering breakthrough technologies. RZ is up $2.00 to $9.20. RZ entered into a series of agreements with UTC Power to provide up to 135 PureCylce geothermal power systems for three Raser power plants. RZ call option volume of 4,366 contracts compares to put volume of 2,255 contracts. RZ May option implied volatility of 128 is above its 26-week average of 108 according to Track Data, suggesting larger price risks.

Option volume leaders today are: Dendreon Corp. (NASDAQ: DNDN), Citigroup Inc. (NYSE: C), Washington Mutual (NYSE: WM) and Research in Motion (NASDAQ: RIMM).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 4-12-07: Ipsco, Raser Tech originally appeared on BloggingStocks on Thu, 12 Apr 2007 13:22:00 EST. Please see our terms for use of feeds.