DARK HORSE HEDGE – After the BOOM!
Add Clinical Data, Inc. (CLDA) SHORT at the market, 7/30/10
Clinical Data, Inc. operates as a global biotechnology company developing early and late stage targeted therapeutics, as well as genetic and pharmacogenomic tests that detect serious diseases and help predict drug safety, tolerability, and efficacy.
After taking profits on earnings sell-offs from AMAG and BOOM, we are adding Clinical Data, Inc. (CLDA) as the 8th SHORT in our currently BALANCED tilt. CLDA is rated a STRONGSELL by Sabrient with a BALANCE SHEET score barely registering at 1.1 (out of 100) and almost non-existent FUNDAMENTALS score of 0.3 (out of 100). These rosy figures combine with five analysts forecasting a second quarter loss of -$.63. That is coming off a mind-numbing first quarter loss of -$1.44 per share, compared with expectations for only losing -$.63. These negatives provide us with a heavy dose of “preponderance of evidence” to believe CLDA is a reasonable SHORT at the market, Friday July 30, 2010.
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EARNINGS UPDATE: Ingram Micro (IM)
Ingram Micro (IM): LONG with Phil’s Buy/Write strategy in DHH virtual portfolio
As expected in our July 26, 2010 post, IM posted better than expected results and higher revenues after the market closed on Thursday. Analysts had been forecasting a profit of +$.37 per share and revenue of $7.9B, but IM delivered a healthy +$.44 per share and revenue of $8.2B. "Every region performed well, with our two largest regions doubling and tripling operating profits on double-digit sales growth," Ingram Micro Chief Executive Gregory Spierkel said in a statement. That is the type of BOOM! (see BOOM! article this morning) statement we like to hear from our long stocks.
We feel very comfortable with the position we put on using Phil’s Buy/Write Strategy. IM is trading +1.67% today at $16.44. Recall that we took in $2.50 in option premium on Monday by selling the December 2010 $17.50 calls and puts. On Monday, we wrote:
Add LONG Ingram Micro (IM) at the market Monday July 26.
We like IM leading into its earnings announcement on July 29, 2010. The 10 analysts covering IM forecast a profit of +$.37 versus year ago profit of +$.20, giving a narrow range of +$.35-+$.39. IM has beaten estimates the last three quarters by an average of +$.067.
We are adding IM to our virtual portfolio using Phil’s Buy/Write Strategy by purchasing ½ of the shares we wish to own, or 200 shares. Using the current price of $16.65, we will purchase the 200 shares (using our allocation method we would want to own 400 shares) and sell two Dec 17.5 2010 CALLS (IM101218C00017500) for $.90 per contract and two Dec 17.5 2010 PUTS for $1.60 (IM101218P00017500), each contract representing 100 shares. This allows DHH to purchase 200 shares of IM at $16.65 but bring in +$2.50 in option premium giving us a cost basis on the 200 shares of $14.15. If on the 3rd Friday in December 2010, IM is trading above $17.50 our 200 shares will be “called” away/purchased for $17.50 putting another +$.85 in our pocket. If IM is trading below $17.50 on the 3rd Friday of December, we will acquire the second 200 shares we wanted to own for $17.50 while keeping the $2.50/share taken in from the options giving us a purchase price for 400 shares at $15.82. Using Phil’s Buy/Write Strategy, we gain control of the 400 shares we would like to add to DHH at a 15% discount to the current market price. (DARK HORSE HEDGE’S BALANCING ACT II)
With the positive performance from the company, we are holding the stock at a net purchase price of $13.45. We think it should go higher, but even if it does not, we bought IM at a discount and will collect the time premium of our sold calls and puts. If you missed this opportunity, the stock and option prices are only slightly changed, and we think this is still a great stock/call/put combination at current prices.
Read Sabrient’s CLDA report here, and IM report here.
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