BBAR is interesting at $4.67 as that’s $957M but they make $413M a year and they have $1Bn in the bank. I think companies like this get missed because their earnings are in Pesos and the screener programs can’t handle conversions properly (seems basic but it keeps happening).
They had a nice, solid business but they embraced digital banking and have grown 10x since 2018, top and bottom lines.
They do have options, only out to December and they pay an 0.20 (4.25%) dividend too. At $4.67, you can sell the Dec $4 calls for $1.20 and the $4 puts for 0.60 and that’s net $2.87/3.43 and that’s hard to turn down so, for the Dividend Portfolio, let’s:
- Buy 5,000 shares of BBAR for $4.67 ($23,350)
- Sell 50 BBAR Dec $4 calls for $1.20 ($6,000)
- Sell 50 BBAR Dec $4 puts for 0.60 ($3,000)
That’s net $14,350 and, if called away at $4 (15% below the current price), we get $20,000 back in December, plus 3 dividends ($750) for a total potential gain of $6,400 (44.6%).
That means, if you cycle this through, you turn $14,350 into $20,750 in one year, then $30,000, then $43,000, $62,000, $90,000 (year 5), $128k, $185k, $266k, $383k, and $552,000 in year 10. I guess we’ll look to add that to the $700 portfolio as well when it comes back around.
