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Posts Tagged ‘AFL’

Deep OTM NP Strategy – SEP Week 4

Posted by mounddweller on August 21, 2011

Fellow Traders,

Many of you may recall my surprise a couple of weeks ago when I announced that there were 88 selections to choose from that week.  Then again last week there were 78 selections.  Well, we’ve now blown those records clean out of the water.  This week there are 414 selections that met our Week 4 criteria.  That is way too many for me to include in a blog post.  Thus, this week I’m going to depart from my normal process and only list the selections that caught my eye and that I think are worthy of your further due diligence.  If anyone is interested in seeing the complete list just leave a comment to this post and I’ll send you a spreadsheet with all 414 selections.

The first thing you’ll notice is that all but one of the selections that interested me are all large-caps.  This is not an accident.  In this type of market I’m only interested in trading stocks that I have no doubt will be around long after this latest crisis has passed.

First up this week is AFLAC (AFL).  I wrote about AFL last week so to avoid repeating myself and boring you I won’t say much about it.  However, last week I shared with you the 1 year price chart.  This week I want to show you the 5-year price chart so you can get a sense for where the stock might go if we encounter another crisis like we had in 2008.

Next on our list is Applied Materials (AMAT).  AMAT provides manufacturing equipment, services, and software to the semiconductor,
flat panel display, solar photovoltaic (PV), and related industries worldwide.   Applied Materials, Inc. was founded in 1967 and is headquartered in Santa Clara, California.

I like AMAT a lot.  It is the very first stock I ever sold an option on.  I have wanted to circle back to it for a long time but felt it was too expensive.  Now it has appeared on my Deep OTM NP selection screen.  I’m going to give it a strong look.   AMAT has a strong balance sheet with $2.35/share in net cash.  It trades at 9.1x trailing earnings and 8.2x expected earnings and it pays $0.32 annually in dividends.  At the $9 strike price that is a 3.56% dividend yield.  I would be very happy owning it at $9.

Again, I’m going to show you the 5-yr price chart.  In this case you can see AMAT is not too far from it’s 2008 lows.  That doesn’t mean it can’t go lower than that but in my opinion it does make it less risky than some other stocks which remain a great distance from their 2008 lows.

BB&T (BBT) is the next selection that caught my eye.  It caught my eye for a couple of reasons.  First, earlier this week it was a featured selection in an investing newsletter to which I subscribe.  Second, the put option on BBT that we are interested in has 33% DSP and again is very close to lows encountered in the 2008 financial crisis.  The $13 strike price has a 1% ROIC.

BB&T Corporation operates as the financial holding company for Branch Banking and Trust Company that provides banking and trust services to small and mid-size businesses, public agencies, local governments, and individuals in the United States.   As of May 17, 2011, it operated approximately 1,800 financial centers in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, Alabama, Kentucky, West Virginia, Tennessee, Texas, Washington D.C., and Indiana. The company was founded in 1906 and is headquartered in Winston-Salem, North
Carolina.

In the interest of time and the length of this post I am going to leave the rest of the list for you to review and do further research on.  However, for those of you interested in Gamestop (GME) I will remind you that I have written about it in my blog before.  Typing GME in the search box will provide you with a list of my prior posts.

Best of luck to everyone in their trades this week.

Regards,

Troy

 

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Deep OTM NP Strategy – AUG Week 1

Posted by mounddweller on August 13, 2011

Fellow Traders,

Well, here we are in the final week before AUG expiration.  Like last week, we have a plethora of choices in our Deep OTM NP Strategy.  This week there are 78 trades which passed our screening criteria.  Below are all of the trades which passed our screening criteria.

From the 78 possible trades I have selected 3 that I think are worth further consideration.  All three are reasonably well-known companies.  Two are large-caps and one is a mid-cap.

First up is AFLAC (AFL).  AFLAC, through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), provides supplemental health and life insurance.  The company offers cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans, and annuities in Japan. It also offers accident/disability plans, cancer plans, short-term disability plans, sickness and hospital indemnity plans, hospital intensive care plans, fixed-benefit dental plans, vision care plans, long-term care plans, and life insurance products in the United States. Aflac Incorporated sells its products through sales associates, independent corporate/individual agencies, and affiliated corporate agencies. The company was founded in 1955 and is headquartered in Columbus, Georgia.

I have had my eye on AFLAC for several weeks now.  It is a well-known and well respected company.  However, because a large portion of its business is derived from operations in Japan, it had fallen significantly in response to the potential impact of the natural disaster which occurred earlier this year.  It looked like a bargain to me at $44.  It looks like an even better bargain now at $37.  However, what has held me back from making an outright purchase of AFLAC is its 5-year price chart.  During the financial crisis of 2008/09 AFL fell to as low as $14.58.

On the positive side of the ledger AFL trades at a forward P/E of 5.73.  Further, over the past 5 years AFLAC has consistently increased its quarterly dividend, from $0.13 to $0.30.

Below is a 1-yr price chart for AFL.  As you can see it isn’t a pretty picture.

With a chart like this I’m sure many of you are wondering why I would consider this as a potential trading opportunity.  For me it comes down to three things, (1) the stock is already at a depressed price, (2) the strike price of $33 is below the lows encountered last week during the huge sell-off in the market, and (3) I really wouldn’t mind owning AFL at $33.

Next up is DELL.  Dell Inc. provides integrated technology solutions in the information technology (IT) industry worldwide. The company designs, develops, manufactures, markets, sells, and supports mobility products, including laptops, netbooks, tablets, and smartphones; desktops PCs; and servers and networking products.   It was founded in 1984 and is headquartered in Round Rock, TX.

What I like about Dell is it’s fundamentals.  It trades at 7.7x prospective earnings.  Over half of it current market cap of around $28B  is in cold, hard cash sitting in the  bank.  While it does have over $7.6B in long-term debt this is easily covered by very strong cash flow.   Free cash flow for the trailing 12-month period is a robust $2.34B.

In the 1-year price chart we can see that Dell has support at our strike price of $13.  Also, the strike price is just below the recent low of $13.49 recorded last week.

My last featured selection for this week is Sotheby’s (BID).  Sotheby’s, together with its subsidiaries, operates as an auctioneer of fine
and decorative art, jewelry, and collectibles primarily in the United States, the United Kingdom, China, and France. The company operates in three segments: Auction, Finance, and Dealer. The Auction segment functions as an agent offering authenticated works of art for sale at auction. It also involves in brokering private sales of artwork. The Finance segment provides collectors and dealers with financing, which is secured by works of art that the company has in its possession or permits the borrower to possess. The Dealer segment invests in and resells artworks. It also operates as an art dealer for Dutch and Flemish Old Master paintings, as well as French impressionist and post-impressionist paintings. In addition, this segment sells works of art directly to private collectors and museums, as well as acts as a broker in private purchases and sales of art. Additionally, it operates a retail wine shop in New York City, as well as offers a range of wines online. The company was founded in 1744 and is headquartered in New York, New York.

Did you catch that last sentence?  Sotheby’s was founded in 1744.  It has been around forever, and has survived the Revolutionary War, the Civil War, the Great Depression, two World Wars and countless other crisis.  Therefore, it seems highly unlikely to me that the current economic turmoil in Europe and the US will cause it much harm.

It currently trades just under 11x forecasted earnings and has strong operating margins.  It also has around $3/share in net cash on it’s balance sheet.  Like our other selections this week the chosen strike price is below lows encountered last week during the huge sell-off.  Here is the 1-year chart for BID.

Well, there you have it.  78 possible trades and three featured selections.  Best of luck to everyone in their trading this week.  I feel we could be in for another rough ride so buckle up tight.

Regards,

Troy

 

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MAR Wrap-up and New APR Trades

Posted by mounddweller on March 20, 2011

Fellow Traders,

Like many of you I’ve spent a good portion of this weekend reviewing how I did in March and looking for potential April trades.  Here’s a brief recap of my March activity.  First, my closed trades:

(1) Back on February 4th I sold 4 MRK MAR $31 puts at $0.35.  After commissions I netted $128.03.  These puts expired OTM.

(2) On February 28th I sold 3 RVBD MAR $35 puts at $0.45.  After commissions I netted $123.77.  This was one of my Deep OTM NP Strategy selections.  The puts expired OTM.

Now, onto my trades which remained open.

(1) First Exelon (EXC).  I started this trade almost one year ago, back on April 16th.  My most recent activity includes selling 2 APR $43 calls at $0.90 and then buying them back late last week at $0.30.  Also, earlier this month I sold 3 APR $40 puts at $0.50.  Between selling calls and puts, and the dividends received I have reduced my cost basis from $42.50 to $37.46.

(2) Next up is Hugoton Royalty Trust (HGT).  This is my third trade in HGT.  The first two were very successful.  I initiated this third trade back on March 1st, buying 500 shares of HGT at $21.50.  On March 17th I sold 5 AUG $22.50 calls at $0.80.    The strategy with HGT is to buy the shares, sell calls 4-6 month out, and then collect monthly dividends.

(3) CSCO is my next open position.  Back on February 10th I opened this trade by selling 5 MAR $18 puts at $0.21.  On Friday I rolled these puts out to JUN for a $0.70 net credit.

(4) NOK is up next.  I did a buy/write on them back on March 11th at a net debit of $8.17.  I sold the APR $9 calls. 

(5) My remaining open position is in Getty (GTY).  On March 14th I sold 5 MAR $22.50 puts at $0.55.  These puts expired ITM and thus I will have 500 shares of GTY put to me at $22.50 on Monday morning.  My plan is to sell the JUN $25 calls at $0.75 and collect the $0.48 dividend which will be paid in mid-April.

Now onto my my list of potential trades for April.

Let’s briefly look at each of these.

(1) First up is Gamestop (GME).  You’ll notice I have them listed twice.  That’s because I can’t decide which trade I like better.  I like the ROIC with the $19 put and I have traded GME at this strike price with good results before.  However, I like the $18 strike because there is better support at this price.

 (2) Next is CSCO.  As I mentioned above I am already short 5 contracts at the $18 strike.  This trade expands my position by selling more puts at a much lower strike.

(3) Aflac (AFL) is my next pick.  It has fallen sharply because of the tremendous disaster in Japan where it does a lot of business.  It closed at $50.47 on Friday well off its 52-wk high of $59.54.

(4) JNJ is up next.  I ‘borrowed’ this pick from by investing buddy Teddi over at www.fullyinformed.com.  JNJ is approaching bargain territory so this is a good trade despite the sparcity of DSP.

(5) AT&T (T) is fast approaching their ex-dividend date and is trading at a nice price.  Thus, I’m happy to enter a buy/write trade here and reinitiate a position in T.

(6) Last up is GTY which I discussed up above.  As I said before I intend to sell CCs against the shares I’m acquiring tomorrow.  With a dividend yield in excess of 8% I won’t mind holding this one for awhile.

Best of luck to all my readers out there.  Let me know your thoughts on my trades and I would enjoy hearing what trades you’re considering.

Regards,

Troy

Posted in Portfolio Updates, Potential Trades, Troy's New Picks! | Tagged: , , , , , , , , , , , , | 4 Comments »

New NP Trade

Posted by mounddweller on May 4, 2009

This morning I executed a NP trade on AFLAC (AFL).  I came across this opportunity over the weekend after running a scan using Visions’ Scout Express.  After finding AFL in the scan I spent some more time reviewing the opportunity.  It seemed too good to pass up.  Fundamentals look good.  AFL has already announced 1st QTR earnings.  They were good.  Like everything else it has rebounded nicely since the market bottomed in early March.  

However, I must note that this trade falls outside of Ron’s parameters for an ideal set-up.  The TAI is at WT (wait), the Buy Rank (BR) is negative, and the stock is above it’s Buy Limit (BL).  The lone positive is the Put Factor (PF) of 4.34.

At the end of the day though, I still like this trade.  IMO, the risk/reward ratio is favorable.  With the MAY 26s I get 11.32% of downside protection and a ROIC of 2.31% with only 10 days remaining to expiration.

Thus, at the open this morning I pulled the trigger on the AFL MAY 26 puts (AJOQT).  I sold 5 puts for $0.60. The MAY 25s (AFLQE) also looked good at $0.40. 

AFLAC is a high quality stock so, worst case, if I get assigned I’m OK with owning it.

afl

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