The Money Tree

Safely Generating Income in Retirement

New Trade – CHRW

Posted by mounddweller on June 13, 2013

Fellow Traders,

I executed a new trade today.  I’ve had my eye on this one for some time now.   I sold puts on C. H. Robinson Worldwide (CHRW).

C.H. Robinson Worldwide, Inc., a third-party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide. It offers transportation and logistics services, such as truckload, less than truckload, intermodal, ocean, and air freight transportation, as well as other logistics services, including transportation management, customs brokerage, and warehousing. The company has contractual relationships with approximately 56,000 transportation companies, including motor carriers, railroads, air freight, and ocean carriers. It also engages in buying, selling, and marketing fresh produce. It offers its fresh produce to grocery retailers, restaurants, produce wholesalers, and foodservice distributors through a network of independent produce growers and suppliers. The company operates through a network of 276 branch offices in North America, Europe, Asia, South America, and Australia. C.H. Robinson Worldwide, Inc. was founded in 1905 and is headquartered in Eden Prairie, Minnesota.  (courtesy of Yahoo Finance)

Here are the specifics for my trade:

STO 2 JUL $55 puts at $1.10

You’ll notice I didn’t go hog-wild with this one.  By that I mean I intentionally kept this a small trade.  I did so because I’ve never traded CHRW before and thus don’t have any experience in how volatile it is or an understanding of how it reacts to market and company specific news.

However, as I mentioned above I have had my eye on it for some time.  Here’s why…

(1) It is on my Dividend Superstars list

(a)  It has increased its dividend annually for the past 16 years

(b)  It’s dividend growth rate for the past 5 years is 12.9%

(c) It’s payout ratio is relatively low, only 38%, thus it has plenty of room to continue growing the dividend

(2) It is trading at multi-year lows

(3) It is trading at a significant level of support

(4) The first three reasons mean I wouldn’t mind owning it at this price and am interested in possibly establishing a longer-term position in it.

(5) Given the low level of volatility in the market, I liked the potential 2% ROIC if the puts expire worthless.

Here’s a one-year price chart which shows the strong support at $56.

BLOG - CHRW 1yr Chart

Here’s the three year chart which show just how far back the support at $56 extends.

BLOG - CHRW 3yr Chart

That’s it for this one.  Other trades I’m currently keeping an eye on include the NUE JUL $42 puts and the CAT JUL $80 puts.  Both ran away from me today but given the recent volatility I expect they’ll come back down and I’ll get another chance to pull the trigger.

Regards,

Troy

 

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2 Responses to “New Trade – CHRW”

  1. Vijay Madnani said

    excellent analysis and great trade. the 7/55 puts are now around .75 thank you for sharing…

    vijay

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