The Money Tree

Safely Generating Income in Retirement

Archive for June, 2010

6/27 – New VISIONS Scan

Posted by mounddweller on June 28, 2010

I ran a new VISIONS scan last night and the volume of stocks popping up on the Scout report continues to increase.  This scan returned 134 stocks that met the Level 3 criteria and 19 that met the Level 4 criteria.  It was only a few weeks ago that I was getting ZERO stocks returned by Scout at Level 4.

There are 4 stocks in the Level 4 list that are rated ‘TA’ (take action) and have a Gold$ score = 80.  They are…

(1) Turkcell Iletisim Hizmetleri AS (NYSE: TKC)

(2) First Solar (Nasdaq: FSLR)

(3) Chemical & Mining of Chile (NYSE: SQM)

(4) Banco Santander, S.A. (NYSE: STD).

I find it interesting that 3 of the 4 are international stocks listed as ADRs on the NYSE.  Perhaps that’s an indicator that we should be diversifying internationally?  Other ‘TA’  rated stocks further down the list (Gold$ < 80) include: GILD, EJ, MAN, MASI, CEPH, PMCS, KCG, NSR, LOGI, DELL, and YHOO.

Up and comers rated ‘GR’ (get ready) and high on the list include: GAME, NTRS, and PBCT.  Of these, GAME (Shanda Interactive) is the most interesting.  It already has a Gold$ score of 82.  It just needs to get back up in the VISION V and it might make an attractive trade.

Let me know if you find any of these appealing and why.  At first glance none of them jumped out at me as a “must trade” opportunity.

Regards,

Troy

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VISIONS Scan

Posted by mounddweller on June 20, 2010

I ran a VISIONS scan this weekend.  For the first time in quite a while it returned more than just one or two possible trades.  In fact VISIONS identified 14 possible trades, 5 of which have a Gold$ score of greater than 80. 

(1) First Solar (FSLR) – Gold$ = 92

(2) Banco Santander (STD) – Gold$ = 90

(3) Logitech International (LOGI) – Gold$ = 86

(4) ExxonMobil (XOM) – Gold$ = 84

(5) Forest Labs (FRX) – Gold$ = 82

What I found particularly interesting in the results of my scan are the increasing number of ‘blue chip’  stocks that are beginning to appear.  The most notable of these is of course ExxonMobil which showed up in the top 5.  Others, in no particular order, appearing further down the list beyond the top 14 I referenced above include JNJ, MSFT, KO, VISA, and GOOG. 

I believe we are still in a bear market thus I want to limit my trades to those types of large-cap companies.  I say keep an eye on them and pounce when the timing is right. 

Regards,

Troy

Posted in Potential Trades | Tagged: , , , , , , , , | 3 Comments »

MYGN – What to Do?

Posted by mounddweller on June 20, 2010

It would be a big understatement to say that I slightly misjudged the inherent risk in my MYGN trade.  Clearly, MYGN was a mistake.  I over emphasized the positives of the trade and failed to turnover every rock looking for the hidden risk.  In this case the risk wasn’t exactly hidden, I just failed to perform adequate due diligence.  The validity of some of the company’s patents have been revoked (MYGN is appealing the decision). 

Initially it appeared after a sharp decline that the stock would stabilize and then begin a slow recovery.  I was fine with this because the company has an excellent balance sheet and there didn’t appear to be any need for immediate alarm.  However, in the past couple of weeks MYGN has continued to slip and has now fallen below support in the $17.50 range.

What to do?  As I see it I have the following choices:

(1) sell OTM naked puts for JUL or AUG in an effort to generate cash flow and significantly reduce my net cost basis if assigned.  I see my two primary options being the JUL $16 or AUG $15 puts.  The downside to this option is committing additional capital to a trade that might not yet have found a bottom.

(2) sell OTM near month calls below my current cost basis of $23.60.  This would allow me to generate cash flow off of my existing position but if the stock recovers I could find myself stuck in between a rock and a hard place trying to rollout my position to avoid assignment below my net cost basis.

(3) sell long-dated calls at or above my current net cost basis.  This option generates little income and has the potential to severely limit my potential gains should the stock rapidly recover in price well before my long-dated call options are due to expire.

(4) sell my existing MYGN shares at a loss and identify a new trade with which I can work to recover my loss of capital. 

(5) do a combination of the above.

(6) do nothing and wait for MYGN to recover.  It has a rock-solid balance sheet and good growth potential.  Eventually the price will recover.  However, given the current overall market condition that could be a long time coming.

I’m open to hearing your suggestions as to which of these options appeals to you and why.  Perhaps there is another alternative I haven’t considered.  If you think of one, please let me know.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , , , | 3 Comments »

A New Tool for Your Option Toolbox

Posted by mounddweller on June 5, 2010

All,

Today I’d like to introduce you to a new tool I’ve recently added to my “Option Toolbox.”  It was developed by my fellow investing buddy, Patrick.  Patrick has just added a new feature to his Market Timing Research web-site (www.mtrig.com).   The new feature is a call and put options search tool.  With Patrick’s new tool you can search online for options which meet your desired criteria. 

You can search by: Market Sector (i.e., Utilities, Technology, etc.), Option Type (Call or Put), Desired ROIC (i.e., 1%, 2%, etc.), Expiration Date, Range of Stock Prices (ex. $10 to $50), Range of Price/Earnings Ratios (ex. 5 to 20), and Dividend Yield.

Patrick has purposely limited the universe of stocks in his searchable database to 734 large-caps; no small-caps allowed!  In our current volatile market environment I think that is a plus!  These are all well-established, more stable companies.

Search results contain the following fields: Stock Symbol, Stock Price, Option Type, Strike Price, Expiration Date, Last Traded Price of the Option, Bid and Ask Prices on the Option, Total ROI, Monthly ROI, Last Trading Day Volume, and the Open Interest.  The search results are displayed in a scrollable box on the screen.  Patrick has also provided a convenient way to export the search results to Excel.      In addition, you can quickly pull up a chart of the underlying stock.  The chart pops up in a new window.

So, why do I like this new tool?  Well, first and foremost, it is quick and easy to use.  Also, it is web-based so you can access it anywhere you have an internet connection.

Downsides?  Well, some might be disappointed with the limited number of stocks in the database.  However, as I mentioned above, I think this is a plus.  Also, this tool isn’t intended for you day-traders out there.  By that I mean that it is limited to closing prices.  In other words, if you run a search at noon on Monday, you will get the previous Friday’s closing prices.  This tool is more targeted towards the guy who gets home from work at night and wants to look for potential trades to enter the next day.

Here’s a link to the tool on Patrick’s site: http://www.mtrig.com/Members/OptionSearch.aspx.  Go check it out!  You’ll notice it is in a “members only” section of Patrick’s site.  However, because the tool is currently in BETA mode, access is free.  Once Patrick is done testing and adding an initial list of desired enhancements it will become a paid feature.  Speaking of which, if you do encounter a bug or data anomaly, let Patrick know.  He’ll get it fixed right away.  Also, if you have an idea for a cool addition to the tool, let Patrick know about that as well.  He’s already added a couple of my suggestions.

Regards,

Troy

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Update – ESV NP Trade

Posted by mounddweller on June 1, 2010

All,

I need to issue a retraction regarding some of my comments in my earlier post on my new ESV trade.  Please note:

ESV has 2 deepwater rigs currently operating in the Gulf of Mexico.

This is what happens when you are in a hurry and don’t take time to verify information you’ve read elsewhere.  I read an article earlier today on SeekingAlpha that said ENSCO’s latest Fleet Status Report dated 5/14/2010 indicated that they did not have any deepwater rigs operating in the gulf.  If I had done two more minutes worth of DD I would have found that the information on SeekingAlpha was not correct.

ENSCO, in fact, has 2 deepwater rigs operating in the gulf, the ENSCO 8500 and 8501.  In addition, their newest deepwater rig, the ENSCO 8502, is currently under contract to begin operations in the gulf in August 2010.  Below is a link to the latest ENSCO Fleet Status Report dated 5/14/2010.

http://www.enscoplc.com/UploadFiles/File/05-14-10%208K%20Rig%20Status(1).pdf

I apologize for any confusion this may have caused.  In addition, I want to thank one of my readers, “dealmakr”,  for bringing this to my attention.  I encourage you to read his thoughts on ENSCO.  They are posted as a comment to my original ESV post.

Finally, I’ll close by reiterating that I’m still comfortable with my ESV trade.  As I mentioned in my original post, they have a rock solid balance sheet and strong growth opportunities.  If I have the stock put to me at $30 I will not be upset.

Regards,

Troy

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New NP Trade – ESV

Posted by mounddweller on June 1, 2010

All,

Sold 3 JUN ESV $30 puts at $0.45 this morning.  ESV is a oilfield services
company.  Historically they owned/operated a fleet of jack-up rigs.  Currently
they are midway through a multi-year expansion into acquiring a deepwater fleet
of rigs.  Because of the disaster in the gulf they have been beaten down from
$51 to almost $35.  They have an excellent balance sheet and pay a small
dividend.  I anticipate they will begin increasing the dividend after they have
completed the buildout of their deepwater fleet.  They used to be headquartered
here in Dallas but recently moved to London.  Their shares now trade as ADRs.   FYI…they currently do not have any deepwater rigs operating in the gulf!  It seems to me the market has ‘thrown the baby out with the bath water’.

My $30 puts yield 1.5% and have 17% downside protection.  Ron’s PF = 2.96.  With
only 17 days to expiration, I think it is a good trade.

Regards,
Troy

Posted in Troy's New Picks! | Tagged: , | 2 Comments »