The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘WM’

New Trade – WM

Posted by mounddweller on September 30, 2012

Fellow Traders,

I executed a couple new trades this week.  First up let’s talk about Waste Management (WM).  As you probably know WM is the largest waste hauler and recycling company in North America.

I have been keeping an eye on WM for quite some time as I would like to add some shares to my long-term holding portfolio.  What I like about it from that perspective is (1) it’s market leader position, (2) it’s sizeable and growing dividend, and (3) it’s a ‘can’t live without it’ service.  It’s a market leader in that it is over 50% larger than it’s nearest competitor, Republic Service Group.  It’s dividend of $1.42 has grown almost 50% in the past five years.  With Friday’s closing price of $32.08, that’s a yield of 4.42%.  Last, but not least, it operates in an industry we can’t live without.  Everyday, in every household in the country, we generate a large amount of garbage which must be desposed of.    Waste Management does a great job of fulfilling that basic need.  Better yet, they take our trash and turn it into cash by recycling commodities and generating energy from our decomposing garbage.

Lately WM has been trending down and is now trading at support around $32.  It’s 52-wk high is $36.35 and the low is $29.77.  I think $32 is a fair price at which to begin accumulating shares so earlier this week I sold to open (STO) 3 OCT $32 puts at $0.40.  My plan is to sell 3 more puts at the $30 strike if it fails to hold at the $32 support.  I’ll sell another 3 at the $28 strike if the weakness persists.

One final note, I traded WM twice late last year, selling puts at the $28 strike price without having them put to me.  If they get that low again, I will be a buyer.

Regards,

Troy

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New Trades – T and WM

Posted by mounddweller on November 24, 2011

Fellow Traders,

Yesterday I opened two new NP trades.

(1) STO 3 T DEC $27 Puts at $0.40

(2) STO 4 WM DEC $28 Puts at $0.40

First, let’s look at my trade in AT&T (T).  I’ve traded in and out of T on a couple of different occasions.  I find it attractive at $27 or less.  I sold my puts when T was trading at $27.63.  With this trade I don’t have much down-side protection but in this case that wasn’t important to me.  If I have T put to me at $27 at December expiration I will be in line to receive the $0.43 dividend; T goes ex-dividend on January 6th.  My ROIC is 1.36% (net of commissions) with 23 days to expiration.

I limited the size of my trade to 3 contracts.  If T continues to move lower I will sell additional puts at the $25 and/or $24 strike price.  T has a solid and steadily increasing dividend.  I think it will find support as its yield closes in on 7%.

Next up is Waste Management (WM).  Regular readers may recall that I sold naked puts on WM last month as well.  The puts at the $28 strike price expired worthless.  Thus, with the market selling off again on Wednesday, I took the opportunity to sell the DEC $28 puts for $0.40.  My ROIC, net of commissions, in this trade is 1.34% with 23 days left to expiration.

Looking at the chart above it should be obvious why I like the trade at the $28 strike price.  WM has solid support at $28.  You’ll notice both the T and WM charts are 3-yr charts.  One thing I’m looking at all of my trades these days is where did the stock trade in October 2008 and March 2009.  This gives me some sense of how much down-side risk I might have if either the European or American debt crisis causes the markets to come unglued.

Both my T and WM trades represent my efforts to focus more of my trades in blue-chip, large-cap, dividend achiever types of stocks.   These are stocks that I can feel comfortable owning and establishing long-term positions in.    Once assigned I can collect dividends over time and sell calls against these positions.

Regards,

Troy

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New Trades – Part Two

Posted by mounddweller on November 11, 2011

Fellow Traders,

Let’s get right to it.  Yesterday, I told you I recently entered 4 new trades and discussed one of them, Waste Management, with you.  In this post I’m going to tell you about my other three trades, one with Cameco (CCJ) and two with the Royal Bank of Canada (RY).

First, let’s look at Cameco Corporation (CCJ).  Cameco Corporation operates as a uranium producer, supplier of conversion services, and fuel manufacturer.  The company was founded in 1987 and is headquartered in Saskatoon, Canada.  This is not the first time I have traded CCJ.  I sold puts on CCJ back in March of this year.  You can read about that trade here: https://troysmoneytree.wordpress.com/2011/03/24/new-np-trade-ccj/.

Here’s my most recent trade.  On November 9th I sold 5 DEC $16 puts at $0.25.  At the time CCJ was trading at $19.44. Thus the $16 strike gave me 17.7% of DSP.  My ROIC, net of commissions on this trade is 1.43% with 38 days to expiration.  Annualized my return is 13.69%.  This is slightly under the 15% targeted return I referenced in my message yesterday but is still far better than money market or bank CD is paying.

Let’s look at the chart for CCJ and see why this trade caught my eye.

As you can see the price chart for CCJ is similar in many respects to that of WM which we discussed yesterday.  CCJ hit a 52-wk high of $44.81 back in February and then fell precipitously after the earthquake and tsunami in Japan.  Last month it hit bottom with a 52-wk low of $16.68.  It then bounced back up to around $23 before retreating again.  Yesterday, it closed at $19.38.

Here’s why I like this trade.  I think CCJ is oversold due to fallout from the Japanese earthquake.  CCJ mines uranium.  Nuclear power is not going the way of the dodo bird.  It will be around for a long time.  As a matter of fact CCJ is so confident of this it plans to double production by 2018.  If I have CCJ put to me at $16 I will own it below the current 52-wk low and very near the 2008 market lows.  It pays a modest dividend that has been steadily increasing for years.  CCJ currently yields 2%.  At my $16 strike it will have a dividend yield of 2.4%.  Not great, but again higher than short-term bond yields.

Last, but certainly not least, I’d like to tell you about my two recent trades in the Royal Bank of Canada (RY).  I have had my eye on RY for several months now.  RY is a favorite of my friend Teddi over at http://www.fullyinformed.com/.  Teddi has written about RY many times.  One of her most recent postings can be found here: http://www.fullyinformed.com/royal-bank-stock-learn-bear/.

As I mentioned I have entered two separte trades on RY.  First, on November 1st I sold 2 NOV $45 puts at $0.80.  With 18 days to expiration net of commissions my ROIC is 1.68%.  Annualized that comes out to a return of 33.99%.  Then, with the stock continuing to exhibit further weakness, on November 9th I sold 2 DEC $40 puts at $0.75.  My ROIC, net of commissions, on this trade is 1.76% (16.91% annualized).

Looking at the chart you can see why I like these trades.  RY is a blue-chip Canadian bank.  It has fallen significantly due to the sovereign debt crisis in Europe.  However, todate there has been no indication that they have much exposure to this problem.  The stock is trading at 2 year lows.  Does that mean it can’t fall further.  No, certainly not.  During the financial crisis in 2008/2009 it did fall much lower.  However, what is important to note is that it quickly rebounded.

RY is a slightly different trade from my normal NP trades in that I want to own RY long-term.  It pays a large ($2.15 / 4.70%)and increasing dividend.   I would eventually like to own several hundred shares against which I can collect dividends and sell covered calls.  My strategy with RY will be very similar to that of my position in Exelon (EXC).

Well, that’s all I’ve got time for this time around.  I hope you will take time to do your own DD on these trades.  I especially like the WM and RY trades.  You may find them suitable for your trading portfolio as well.

Regards,

Troy

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New Trades

Posted by mounddweller on November 10, 2011

Fellow Traders,

I’ve fallen behind in updating you on some of my trades.  So, without further delay I’d like to tell you about a couple trades I made last week and another couple I made earlier this week.

First up is Waste Management (WM).  WM has been on my radar screen for a few weeks now.  I’ve had considerable success in the past selling puts on large-caps which are currently out of favor on Wall Street.  I think WM is a similar opportunity.  Let’s take a look at the price chart and you’ll see what I mean.

After hitting a 52-wk high of almost $40 back on May 2nd WM fell sharply and subsequently hit a 52-wk low of $27.75 on August 9th.  Since then WM has rebounded to as high as $35 before falling back.  Today it closed at $31.16.  Last Tuesday, November 1st, I sold 4 NOV $28 puts at $0.25.  At the time I placed my trade WM was priced at $31.72.

I felt comfortable placing this trade for several reasons.  First, my strike price of $28 was very near the $52 wk low.  Also, its financial crisis low in March of 2009 was $23.26.  Second, WM has a dividend of $1.36 / share.   If I were to have WM put to me at $28 my dividend yield would be 4.86%.  Over the past 5 years WM has increased its dividend by 55%.   Third, my ROIC, net of commissions, is 0.8% with an 18 day holding period and 11.7% DSP.  Annualized my ROIC is 16.23%.

For these kinds of trades I like to have an annualized return greater than 15%.  Why 15%?  Because at 15% you’re doubling your money every 5 years.

OK, I’ve ran out of time tonight before I’ve been able to tell you about my other 3 trades.  I’ll by back tomorrow with another post to tell you about RY (two trades) and CCJ.

Regards,

Troy

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Weekly NP Strategy – SEP17 Exp Results

Posted by mounddweller on September 17, 2011

Fellow Traders,

Well our second week of selecting weekly NP trades has concluded.  Let’s take a look at how my choices faired.   You’ll recall my choices were:

(1) The $30 strike of Agilent (A) closed OTM yesterday at $36.36

(2) The $11 strike of Alcoa (AA) closed OTM yesterday at $11.97

(3) The $23 strike of Adobe (ADBE) closed OTM yesterday at $25.52

(4) The $30 strike of Sotheby’s (BID) closed OTM yesterday at $38.22

(5) The $77.50 strike of Catepillar (CAT) closed OTM yesterday at $85.90

(6) The $80 strike of Cummins Engines (CMI) closed OTM yesterday at $97.84

(7) The $22 strike of Encana (ECA) closed OTM yesterday at $23.85

(8) The $19 strike of Intel (INTC) closed OTM yesterday at $21.97

(9) The $25 strike of Microsoft (MSFT) closed OTM yesterday at $27.12

(10) The $40 strike of Pall (PLL) closed OTM yesterday at $44.03

(11) The $50 strike of Transocean (RIG) closed OTM yesterday at $59.17

(12) The $11 strike of Charles Schwab (SCHW) closed OTM yesterday at $12.34

(13) The $29 strike of Waste Management (WM) closed OTM yesterday at $32.01.

Hey, how about that!  13 for 13.  Two weeks running we haven’t had a single selection finish ITM.  We’re off to a awesome start testing the possibilities of this Weekly NP Strategy. However, two weeks does not make for statistically valid testing.

Regards,

Troy

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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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