Friday, June 6, 2008

For the Record

Brian A. Davis'
Weekly Stock Wrap

Stock

P=Put

C=Call

Purch. Date

Purch. Price

per share

Friday Close

6/6/

2008

Net Gain/Loss

BAC 1/30s P

6/4/2008

3.00

3.65

22%

XLK 1/25s C

5/22/08

1.70

1.90

12%

TRLG 10/22.5s P

5/14/08

3.20

2.20

(31%)

COF 1/50s P

4/28/08

8.10

9.50

17%

PQ 10/20s C

4/15/08

2.60

5.60

115%

NCC 10/10s C

4/09/08

1.30

.05

(96%)

NCC 10/8s P

4/07/08

1.55

3.20

106%

*Note highlight denotes recent transactions.
**Please accept my apology for formating.

The Weekly Stock Wrap will be done in this format, until a better one is found.
BAC
After my last Seeking Alpha article "It Ain't Over Til It's Over", I made a case against banks which have a considerable exposure to credit cards. I noted that BAC is the world's largest underwriter of credit cards. On June 2nd, Standard and Poors revised its outlook to a negative. The revision reflects continued weakness in the financial sector with the possibility of additional write-downs. Moreover, more questions are being raised about the less diversified banking models. (1) The 1/30 put has earned 22% in two days...I'll take it.

XLK
Rates will be kept low for businesses as we continue experience all the effects of a downward business cycle. Like Darwin's Theory of Natural Selection where only the strong and those most able to adapt will survive, the same case can be made for business. Successful companies will innovate, and evolve through the down cycle, and XLK represents an excellent basket of stocks that are positioned to benefit in this environment.

TRLG
This one may have been a mistake. A number of pundits are ballyhooing it. The company caters to the higher end customer with expensive clothing. In order for the company to be successful, it will need additional help from the masses. Look for this company to turn back into the teens by August. (2)

COF
COF is a company that is well positioned for the squeeze play. High credit card and auto loan exposure to the sub-prime market is always a risk. However, the onslaught of unemployment numbers, default rates, gas prices, commodity jolts, tighter underwriting standards, and banking jitters is enough to send this one into a tailspin. (3) Horowitz has it right!

PQ
With an itchy trigger finger, I contemplated dumping PQ this morning. After all, at one point in time it was trading at 6.60 this morning. In a phone call to the company, I inquired about the company's strength of production...oil or natural gas. Natural gas still has legs and should run a bit longer.

NCC
A strangle was made here. Calls at 10 and puts at 8. While the call is D.O.A., so far the strangle was successful. A double digit gain is a double digit gain.

The Truth Police
The Truth Police will be monitoring comments made by Thomas Lee on Bloomberg TV this afternoon. According to his analysis, Lee suggested that the SP 500 will have triple digit growth to 1,450 by the end of this year. He also suggested plays in financials, oil and consumer discretionary spending. (4) Should this be the case...let's track it here. I would like to be the first to recognize Let's put Lee into a purchase of:
XLF 23.33
XLY 31.26
XLE 86.02

Sources Cited:
1.http://www.streetinsider.com/Press+Releases/UPDATE:+S&P+Issues+Negative+Actions+on+
Investment+Banks+(LEH,+MER,+MS,+BAC,+JPM,+C,+WB)/3705220.html

2. http://caps.fool.com/Ticker/TRLG.aspx

3. http://www.thedisciplinedinvestor.com/blog/2008/04/11/
capital-one-misundrstood-by-bulls/

4. http://www.bloomberg.com/apps/news?pid=20601087&sid=aNrvd_rk.PUs&refer=home

4 comments:

AX said...

Bri, good job with the options, especially PQ. Homerun in progress...should've heeded your advice on that one. Gold and oil booming, hanging onto those commodities for now, but thinking about swapping oil for silver if we get to $150 on possible short-term pullback. Guess that's why they call it hegding, FCX up $6 yesterday, NCC down 7%, COF down 6%. The volatility is good.

Tiger Coach said...

Thanks...maybe we should better coordinate our trades so we know what we are doing ahead of time... BAC and STI look as though they are taking on a bit of water... Do you think we missed the boat of RKH? Perfect reason why we should be selling our information...

WGO would have worked...down to 13.08 yesterday...still kicking myself...

TRLG...how many pairs of $100.00 jeans has your family bought lately?

AX said...

The reason I went long TRLG for both calls and ownership is for precisely that reason. TRLG jeans cost $300, t-shirts $100. The people who can pay those prices don't care about $4 gas.

RKH will continue to be volatile, but I'd short individual banks, not the index.

I still think you're getting ahead of yourself as far as "selling picks." If I didn't know you, I'd read your profile and say, hey, this history teacher has some good ideas. But would I pay you to set up my portfolio versus buying an investment letter from Gartman (who I think is a hipocrit by the way) or Ken Fischer or any of the many pros who have a much longer track record?

I have some excellent picks dating back to 03' producing triple digit returns. Even that may not be long enough. I'm still learning options, and despite early success, this market may not be typical of any market we'll see for a long time.

Tiger Coach said...

You may be right about the selections... I guess my point is easy. I look at the "experts" who are committing highway robbery in the mutual fund game...and know we can do betters than those crooks. Veterans can never garner rookie of the year honors...:) BD