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Dykstra: How to Keep This Rally Alive

09/13/05 - 07:03 AM EDT

Lenny Dykstra

Its forward price-to-earnings (PE) ratio is 16.45; the return on equity (ROE) is 22.61% and it has plenty of money left after it pays its bills to throw in the "kitty" with free cash flow of about $60 million. Mine Safety just broke through its 21-day moving average at $41.35. I think we are in the sweet spot here. It's going higher!

By the way, remember what I said last week: If you don't want to drop $41,000 for 1000 shares, buy a deep-in-the-money call, because there is minimal premium to pay. For example, you can buy 10 contracts with a Dec. 30 call for somewhere around $12,500. In other words, you will control 1000 shares of Mine Safety all the way until the third Friday in December, with virtually no premium for approximately $12,500.

That is the beauty of options -- the ability to leverage your position. But beware, options move fast and if you are not on top of your game, options can exact some significant pain!

Batting Second: Boston Scientific (BSX - Cramer's Take - Stockpickr), which closed Monday at $25.04. In my opinion, this could be one of the most undervalued stocks on the New York Stock Exchange. I'm not just telling you this because it's "Boston" and my good friend, Curt Schilling, pitches for the Red Sox. No, this is more about the "Scientific" part.

Boston Scientific manufactures minimally invasive medical devices used in interventional cardiology, radiology and other medical applications. The stock is trading at a forward PE of 12, and Boston Scientific's return on equity is almost 30%. Are you ready to talk about cash flow? How about almost $2 billion in cash flow from operations and free cash flow of $655 million?

At the time of publication, Dykstra was long Boston Scientific and long calls on Dow Chemical and Biomet.

Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s and the Phillies of the early 1990s, including the world champion 1986 Mets squad.

Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.


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DOW was an pick on 2004-06-23