Dykstra: For Options, This BUD's for You

On Tuesday I recommended Starbucks (SBUX Quote), which delivered a quick win, providing a little jolt of profit in our accounts. Like Starbucks, today's recommendation needs little or no introduction -- its brand is the definition of an American icon.

The maker of the "king of beers," Anheuser-Busch (BUD Quote) can trace its origins back to 1852, and today it boasts the two best-selling beers in the world, Budweiser and Bud Light, operating 12 breweries in the U.S. with operations around the globe.

Anheuser-Busch has a pristine balance sheet, with revenue coming in at $15.82 billion, a forward price-to-earnings ratio of 16.28 and a return on equity (ROE) of 52.04%. To finish it off, we can take some comfort in knowing that the Oracle of Omaha, Warren Buffett, owns 4.68% of the common stock, or about 35,563,000 shares.

Anheuser-Busch reports earnings on July 25, and in what's hopefully a preview of things to come, Mexican brewer Grupo Modelo, half-owned by Anheuser-Busch and the maker of Corona beer, posted a 12.6% rise in second-quarter net profit, with overall net sales increasing 25.5%.

I will take advantage of the discounted stock price -- the stock has been essentially treading water for six months, recently trading at $50.02 -- and buy 10 contracts of the January $45 (BUDAI) deep-in-the-money calls at $6.60 or better. Use limit orders, and let the stock come in.

Reader Email

Now let's check out some reader emails.

< Previous

1 2

Next >