OK, who do we like on the Watch List?
BMY (3/5) – Last July, BMY took a huge hit because Opdivo (late-stage cancer) failed in trials and the stock collapsed. On Jan earnings, they missed estimates by 0.03 but earned 0.63 per $60 share so on track for $2.50 and a p/e of 24. There were, however, still extra expenses as they try to get Opdivo back on track (for wider acceptance – it's already being used for some cancers) and I think their guidance of $3/share will ultimately hold up. Too bad we missed them at $46, now $57.26 but volatility is good for put prices and we can sell 2019 $50 puts for $5.20 for a net $44.80 entry (below the lows) and that can be paired with the $50 ($11.50)/60 ($6.25) bull call spread at $5.25 so net 0.05 on the $10 spread and ALL BMY has to do to make a $9.95 return (up 19,900% return on you nickel!) is make it back over $60 in two years.
Same place so still good (no, I'm not redoing all the numbers!
ESRX - even cheaper!
ESRX (2/17) – Another beaten-down Pharma that is worth owning. They made $2.5Bn last year, up from $2Bn the year before and they did $1.4Bn in the last two Qs so pacing towards $3Bn yet you can buy this company for $42Bn (trailing p/e 17) at $70. We can promise to buy them for $65 and get paid $8 to do it, which is net $57 which is 18.5% off the current price. In the LTP, I'm just going to do those but you can be aggressive and add the $60 ($17.50)/75 ($9) bull call spread for $8.50 and then it's net 0.50 for the $15 spread that's $10 in the money to start.
