Wednesday, December 08, 2010

8 December 2010 It’s a real nowhere market. . .


8 December 2010 It’s a real nowhere market. . .

As in, not going anywhere. First off Happy Birthday Debbie.

Ok I read Cramer’s first message of the day and I swear he must have read my blog. The title of the piece was “A Big Defeat for Obama”. Again Mr. Cramer feels there could have been a better message than let’s take off the gloves and agree to fight two years from now.

Then I was looking for some quick option plays. The first thing I did was to cover a gain in my GLD ETF by buying some June $110.00 puts on the ETF at 1.24. Don’t get me wrong, I feel GLD has a way to go yet and look for my exit closer to $1500 and ounce. It’s just that there could be a correction of 10% or so and this is a good way to make money on the way down, take the profit and pick up more of the ETF when it corrects.

Then we took a 48% loss on a TIVO December 9.00 call. In looking at the trade, I should have gone further out on the call, perhaps a March or April option. Basically I was buying a rotten Apple (Not AAPL) because I bought it so close to the December 18 expiration date.

Right out of the box this morning we picked up on a positive future guidance statement from the management team at GIII, G II Apparel. At 6:31 we picked up some March 30 dollar call options at $3.10 a contract. We sold them at lunch today at $4.00 a 29% gain in four hours.

We also sold out of our $20.00 April call options for BKI Tech we mentioned here about a week ago. We got in at $2.15 a contract and are out at $2.90. That would be a 34.8% gain before fees.

We know that these trades might be hard to follow, but since jerking around with these options, we have had the best 5 weeks in my 25 years of investing. My realized gains, since November 1, 2010 is 10.1%. We have never broke 10% in realized gains in one month.

Lookin’ for yields in all the right places.

Now our regular reader and occasional contributor “Hutch” might think this segment is for him, it really is for everyone. Seeking Alpha and AAII (American Association of individual investors both did pieces on high yield high growth stocks. First I wanted to share some of their picks with you then show you how to harvest your own.

Both articles suggest using stock screeners that have a combined growth and dividend yield of 10% or better. In other words a company with an annual revenue (sales) growth rate of 5% and a dividend yield of 5% would qualify.

Here are some of the winners. ABT Abbott Labs, JNJ Johnson & Johnson, Harleysville Group HGIC, Kimberly-Clark KMB, Northeast Utilities NU, Buckeye Partners BPL, Intel Corp INTC, CenturyLink CTL, Smucker’s SJM, Procter & Gamble PG, Coca-Cola KO, and Aqua America WTR.

OK kids follow along at At the home page pick Stock screener. You will see that you are screening 6756 stocks. On the top of the selection page, choose dividend yield. Click on the box and you will see a drop down menu. You will see a list of choices. For this exercise I am using >5% because I only want to see companies with a dividend yield of 5% or more. That screen will result in a list of 909 companies. Now we will use the tab next to Overview called Valuation, click on that tab and you will see anew page of criteria starting with a column called Market Cap. At the top of the screen filed you will see a box called fundamentals. Click on it. Of the 29 criteria choices in front of you, from the second column choose sales growth over the last 5 years. Select >5% and click on it. You now have narrowed your search to 192 companies. Now you can stop here or limit your list more. For this exercise we will stop here and work with these 192 companies. With the list in front of you go to the third tab and click on financial. Your second column is dividend. Click on it once and then one more time. It should display the list in descending order with BSI at the top of the list with a dividend yield of 39.98%. That was the sound of our friend “Hutch” fainting. Wake up Bon the payout ratio is 120%, it’s not real. Any once you have the list in descending order, go to the bottom of the page and you will see a little blue word called “export”. Click on it. It will open a dialog box asking you to open or save the file as a CSV file (it’s a spreadsheet and it will be saved in Excel). Save it with a name you can remember. Then open the file. It is a huge excel spread sheet but don’t let it scare you as we will be dumping all of the columns except the dividend. If you know how to do that, do it now while I explain how to to the everybody else. Go to the column headers and highlight all of the columns except for dividends and the company name and delete. You should end up with the column with the name and the column with the dividend yield in descending order.

Now go back the finviz page and choose the valuation tab and it will populate the page with the valuation information. In the 13th column over you will see 5 years sales growth. BSIs 5 year sales growth is 6.49%. Again, go to the bottom of the page and click on export. This time you will have another spreadsheet open up. Save it with a similar but slightly different name so you can find it. Open that spreadsheet. Cope all of the data from the 5 year sales history column and past it in the third column of your first spreadsheet. I know ti sound confusing, but if you follow along it makes perfect sense. You should end up with a 4 columned spread sheet with number as your first column, ticker as your second column, dividend yield as your third column, and 5 years sales as your fourth column. Now we want to ad the 3rd and 4rth column. Go into cell e1 and type =C1+D1 and hit enter. You should see that cell, E1 display the value of 46.47% for BSI. Now you will go to the top of the menu bar and choose data. In the drop down menu choose sort. In the first box choose sort by Column E and pick the radio box descending. You should see 56 HTGC with a combined sales and dividend value of 229.85%. You now have a list of 192 companies to start doing homework on, that have great (if not unbelievable) sales and dividend numbers. If anyone wants a one on one demo of what I did, please drop me a note and I will make it happen. The stock screener is one of the best FREE screeners out there. Have fun with it.

Hot off the presses.

SAI SAIC, Inc. provides scientific, engineering, systems integration, and technical services and solutions to various branches of the U.S. military, agencies of the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security and the other U.S. government civil agencies, state and local government agencies, foreign governments, and customers in select commercial markets.

We read a late day poor guidance report on the company for next year. We are going to try for some 16 dollar May puts at the 90 cents. When the stock moves towards 15 we should see a 30-40% gain on the put. We’ll see.

President Obama introducing one of his new contenders for his fight agaisnt the Republicans in 2012.
Salve Lucrum


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