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Deep OTM NP Strategy – DEC Week 2

Posted by mounddweller on December 3, 2011

Fellow Traders,

Our Deep OTM NP Strategy selection criteria returned 12 possible trades this week.  As you can see I have highlighted two that I think warrant further attention.

Let’s first take a look at Monster Worldwide (MWW).  Monster Worldwide, Inc., together with its subsidiaries, provides online employment solutions worldwide. The company operates a network of Websites that connect employers and jobseekers. It was founded in 1967 and is based in New York, New York.

MWW trades at 0.74x book value and 13.35x prospective earnings.  It has positive cash net of total debt on its balance sheet and generates positive free cash flow.

Friday, MWW closed at $7.34.  The DEC put we’re interested in has a strike price of $6.  This is below the 52-wk low of $6.34 which occured on October 4.  With almost 19% DSP and an annualized ROIC in excess of 21% this trade appears to have a reasonable risk/return ratio.

Next, let’s take a look at Arkansas’s Best (ABFS).  Arkansas Best Corporation, through its subsidiaries, engages in motor carrier freight transportation in the United States. The company provides shipping services to its customers by transporting various large and small shipments to geographically dispersed destinations.   It was founded in 1935 and is headquartered in Fort Smith, Arkansas.

ABFS, like MWW, trades under book value (0.98x) and less than 14x prospective earnings.  It is net cash positive and generates solid free cash flow.  It also pays a small dividend.

Friday, ABFS closed at $18.80.  The DEC put we’re interested in has a strike price of $15.  This is just above the 52-wk low of $14.22 which occured on October 4.  With almost 21% DSP and an annualized ROIC in excess of 17% this trade too appears to have a reasonable risk/return ratio.

Well, that’s all I have for you this week.  Best of luck to everyone.

Regards,

Troy

 

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