Another crazy day!
We answered many of the morning’s quesitons: Oil did break $88 (briefly), gold made it as far as $772 but finished flat for the day and Cramer did find a way to tell us how he was right all along!
We had a great day as our ERIC play came in just the way we planned it and right after the market opened we hit our Daily Double with DRYS $120 puts – a great way to get the day going! Our BXP and VNO puts came up with big returns as well and we cashed out many puts, as planned this morning. With the markets firming up mid-day and our resident tech guru, Reinharden, coming in to remind us that the Nasdaq had reason to lead – we took a chance with some new INTC Nov $32.50s at just .35. Those along with our existing YHOO calls should give us a great morning tomorrow as both companies had very nice earnings.
It was a perfect day for our earnings plays as of third tech call, the IBM Jan $120s, were the only ones we covered and it looks like our poor Oct $120 caller will not be having a good day but we should be in fine shape as the numbers for IBM were as good as any investor (not trader) would want.
With earnings coming on strong, I want to take this time to review Reinharden’s notes for the week on our various upcoming tech plays so we can be ready for the week ahead:
AAPL (10/22) should be more of the same. Probable surprise to the upside, but
guidance likely almost certainly beneath street consensus. So who knows how
the stock will react. I remain quite long AAPL overall.
We’ve got a ton of Apple with an upside bias so no argument there!
INTC (today) will probably beat expectations, but I wouldn’t want to guess on
magnitude of beat or guidance on margins. Things should be moving in the
right direction, but I expect Q4 to be Intel’s quarter to really shine as
they complete their transition to 45 nanometer parts and continue to destroy
AMD in most of their markets. I’m playing with the Jan 2009 $30’s and $35’s
and looking forward to Jan 2010 $40’s becoming available
Well that one didn’t take long to come true. Thanks Rein for reminding us in chat today.
If MSFT (10/25)can hold above $30, I think it’ll make a run towards $40 for January
2009…but while they do have some hidden value, it’s practically a market
perform stock at this juncture. And they’re under continued siege from AAPL
and GOOG (and Nintendo isn’t helping and losing Bungie was a pretty bad
sign).
Someone asked if we should sell calls against MSFT this morning and my response was "I wouldn’t sell against that one unless the market is really falling apart ." We already have hedged MSFT plays that are up nicely in the $25KP and the Dow Virtual Portfolio but I’m warming up to a pre-roll to the Apr $55s at .55 so we can keep selling closer calls without an upside concern.
MOT (10/25) is probably more than a couple of quarters from recovery — from a
company performance perspective. The stock will undoubtedly move out of
sync. I’ve a stock position in my long-term virtual portfolio, but they’re probably
going to suffer at the hands of their traditional mobile telephony
competitors and AAPL. Their networking side of the house is making
progress, but I don’t think it’ll make up for things in the near future.
As expected, MOT took a hit this morning off ERIC’s news and wasn’t exactly bouncy during the day. There was nothing to panic our Jan $17.50s over in the .18 sell-off but we’re up 203% on that position and, if we’re not going to protect it, we certainly need to at least keep tight stops or simply roll it over.
BRCM (10/23), GLW (10/24), and STX (today) are still on my accumulate list (but semis have been out
of favor and you know how I love them). BRCM is getting harder to
rationalize with its post-August run. STX is quietly churning along and not being
rewarded for their efforts. With a forward PE of 10’sh, all they do is grow
their business. Hard drives aren’t going away for awhile. I’ve a variety
of positions in these.
I continue to wish there was a direct way to buy Samsung, but not enough to
buy the South Korean HLDR.
I agree on Samsung, that company is firing on all cylinders and it’s very unusual for us NOT to have a play on GLW but we got out on the last run and are waiting for them to retest the 50 dma at $24.50. BRCM is iffy at this level (in other words, damn it – we missed it) but STX just announced great numbers with net income up 1,800% over last year’s Q1 (fiscal) and that’s WITHOUT excluding another 150% worth of amortization charges from their very smooth acquisition of Maxtor. They beat guidance they raised in August and the company shipped 21% more disk drives than last Q1s with laptop unit growth up 87%.
Reinharden’s right, this company gets no respect and contines to get none in after hours trading so it’s straight to the LTP with the STX Jan ’09 $25s for $5.45 and we’ll see what kind of day we have before making a sale but there will be no shame in taking $1.05 for the Nov $27.50s for a nice 20% first month return.
MU (10/2), SNDK (10/18), and the memory folks don’t have enough pricing power to be of
immediate interest to me (regardless of my love of semis). Although the
aforementioned Samsung still seems to execute well and profitably in that
market
MU is a staple of our Stocks Virtual Portfolio and is a serial underperformer (but great to sell calls against) and our poor October callers are the latest victim as we are up 47% against them already and these are the 5th set of callers we’ve gone through since we picked up the stock in May. SNDK is one of our favorite leaps, not because they go up but because they go up AND down at an alarming rate bucking callers off like a bronco and then pulling them back in, sometimes 2 or 3 times during a single expiration period. Heaven forbid this stock actually takes off and it could blow our whole gig but I do like them a lot as they retest $45 for a new play so we’ll keep an eye on them.
Back in January I gave my take on this sector with my article: "I Do Believe in Semis – I Do, I Do" but we’re not too far from where we started they year on the SOX (470) so we’re all going to have to clap our hands really hard to get a proper Nasdaq rally going because the Nasdaq can’t break out without its SOX, especially in the winter…
TLAB (10/23)is getting a bit of my interest, but I’ve not fully decided. There’s a
mini-boom just starting in fiber-to-the-premises and TLAB was an early
leader in the technology (BPON). What’s not yet clear to me is whether they
were leap-frogged (the next generation is GPON). ALU and Calix and even MOT
shipped GPON well before TLAB. With a book value of $6.85 and a share price
of $9.39; there’s a lot to like. Although the most recent quarter
apparently wasn’t great. That having been said, Jan 2010 calls @ $10 go for
about $2.25 and Nov $10 calls go for $0.55. 24 months of selling TLAB calls
might be more than okay
More than OK is right, you can’t argue the math and the expectations (.02) are very low for next week so that’s another XXX for the LTP but let’s take a chance with a 1/2 cover as I can see these guys very easily rocketing back to $10 or even $10.50 as long as they don’t miss.
Being a long-time networking geek, I’m appalled at how low LVLT (10/23) has fallen.
But they’re in the realm of "They’ll either double or go bankrupt" and right
this second I can’t say which. Of course, with a revenue of nearly $4B, an
enterprise value of nearly $13B, and a good shot at bankruptcy, they are
probably pretty fairly priced. On the other hand, they are about the only
technology play that Warren Buffet has ever made and I could see him buying
it once again since their biggest problem is interest — and from Mr.
Buffet’s perspective, LVLT is not dissimilar from a pipeline for bits. [And
Walter Scott, Jr. is still Chairman of Level 3, still a long-time friend of
Warren Buffet, and still on the Board at Berkshire Hathaway…on the other
hand, BRK doesn’t own any MSFT so far as we know]
This company is a texbook case of unrealized potential and they are swimming in debt but we can do a DNDN-type play as the Jan ’10 $5s are just $1.33 and we can sell the Nov $5s for .17, it may not seem like much but that’s a 12.7% one-month return on your investment so it’s great as long as your broker’s fee structure doesn’t eat all your rolls.
So we’re going to keep these stocks in focus and track their progress for the next two weeks, if the markets are going to have a bull premise, I feel strongly that this has to be it. Thanks once again to Reinharden for all the hard work, see this morning’s chat for quite a bit more in-depth analysis.
