Tuesday, January 11, 2011

11 January 2011 You win some and you win some


11 January 2011 You win some and you win some

On January 5 we told you about a downplay of TKLC Tekelec which engages in the design, development, manufacture, marketing, sale, and support of telecommunications products and services. We told readers were looking at some May $12.50 puts at the 85-90 cent range. We were happy to take a 19% gain today.

On January 6, we highlighted BLUD, Immucor, Inc., an in vitro diagnostics company, engages in the development, manufacture, and sale of reagents and automated systems. We licked up some June $22.50 calls at .85 cents and got out today at $1.35 a 58% gain.

In one we apparently did not highlight here (my bad) we got in some June $12.50 calls on SGEN Seattle Genetics, Inc., a clinical-stage biotechnology company, focuses on developing and commercializing monoclonal antibody-based therapies for the treatment of cancer and autoimmune diseases. We got in at $3.83 a call (one of more pricey calls) and got out today with a 28% gain. Now it would be easy to criticize that we are getting out way too early. You maybe right, but (Behold the Underlying Truth) I have a lot of RED in my option folder right now and will be needing some cash, so I am taking gains when I can get them. We have also seen 30% gains shift to 70% losses in a matter of minutes.

Today we got wind of a short term possible upside on AKAM Akamai Technologies, Inc. provides services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally. In what I am hoping to be a short term flip, we picked up some February 46.00 calls for 4.70 a call. We are looking for a flip over 20%.

Have you heard the news

Today the Federal Reserve announced they earned 80.9 billion dollars in 2010. (That is what they made in their investments in the bailouts.) Now remember this is the Fed and they can print money as much as they would like. So they can print money, buy mortgages, collect interest, and give any excess to the Treasury. Now the Treasury is 13.8 Trillion in debt, but the Fed did pay them 78 Billion. Ok let’s try and put that in terms you and I can understand.

If you met the Treasury Family and got to know them well enough to see their financials, they would have earned about $78,000 dollars in 2010. Not too shabby. However their debt on their house and credit cards were $13,800,000. Fortunately, they have Uncle Feddy who can keep printing money and increasing that debt so they don’t get thrown out of their house. Hope that helps paint the picture of how the Treasure Family is doing and how you can put it in perspective when you hear about how well the bailout has performed.

So how did the market do today.

Volume was down for another day even though we had some good earnings reports and we got the word that Japan has won the bigger fool theory this week as they committed to helping out in the European debt issue. That helped lower the dollar and when the dollar drops, yeah commodities came back a bit with oil breaking $91 a barrel (I think).

Now one thing to note when you look at the S & P action today, look at the indexes reaction to the afternoon dip. Volume spurted a bit and it closed up a bit. That could mean we have bunch of big money folk “sittin on ready”. Let’s hope so. The IBD (Investors Business Daily) Accumulation/Distribution rating dropped from B to B- from Friday to Monday. We are tracking this closer this year because it is very relevant to option volatility.

Take look inside

I could either prognosticate about tomorrows data points or share with you a review of a holding in the portfolio. Since I have to check up some of these holdings I chose the latter. One of our larger non-bond holdings is KO Coca Cola Co. After the May 6th Flash Crash, we had to pick up the pieces of our portfolio and after my panic sell buy sell mess up, we settled down and looked for some good value. From May 13 to the end of June we bought in with an average price of 52. It was mentioned here on several occasions in May and June. It had great financials and a P\E ratio of 14.2 and we pegged a 20 % upside by year end which would have put it at about $62 a share. The stock did peak at $66 and has now corrected to $62.

The fundamentals are still sexy and it throws a 2.8% dividend. Recent target prices have the stock headed to 72-74. The price to book and the price to sales are a little rich, but that is not unusual as Coke is the Worlds Most Recognized Brand. We are keeping the stock and will look for opportunities to buy more via dips in price or attractive call options. They can sell a can of coke in any corner of the world. Despite that, they are plowing another 20 billion into distribution efforts in the CRAM countries. (Ok, I just made that up. After all, the BRIC terminology had to start somewhere. CRAM means China, Russia, Africa, and Mexico.) They continued to expand into juices, sports drinks, bottled water, coffees, and teas. KOs margins are obscene, but that should adjust as commodity prices ramp up. Also on the downside, they suffer from the law of big numbers. Protecting market share is harder than ever. They have no fast food or snack diversification like Pepsi. It still is not clear how the acquisition of its North American Bottler CCE will impact long term.

With all of that said, I’d have to say is Thing Go Better With. . . . .

Tis the season to start golfing.

In case you missed it, this weekend was the start of the 2011 Golf Season.  So it is time to get out the clubs, polish them off and start your golf stretching excersizes.
Salve Lucrum


Post a Comment

<< Home