This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

KLAC: Let's Go Stock Picking!

Stocks in this article: KLAC SMH INTC AMAT ARMH

KLA-Tencor (KLAC) is in the business of designing, manufacturing and marketing (selling!) semiconductor equipment and materials of such. It has been been in this business almost from its infancy in the 1970s.

Management should be considered excellent, as well as somewhat conservative given the fact that the company has basically zero debt (relative to cash on hand) as well as approximately $8 per share in net cash. However, the 17 analysts who follow KLAC according to Yahoo! Finance consensus estiamtes see an earnings decline ahead. They think KLAC has earnings headwinds all the way into the end of their fiscal year, which is June 2012!

Technically I will let T3 do the analysis, with the only comment I have is that KLAC is now priced as per perfection, having gained over 10 points (30%) since October 1! Thus I am thinking reversion (a bit lower stock pricing!) could soon be in play for KLAC.

Let's review the T3/OP video with and see where Scott prices KLAC in the near-term on the charts and why Jill wants to own it for the long-term based on fundamentals.

Not too many fund managers want to own any stock not growing their earnings relative to the stock's price earnings ratio! That is especially so in a market that is replete with competitor stocks in the semiconductor sector that are expected to show good to excellent growth in their earnings throughout the calendar year forthcoming.

The trade in KLAC I prefer is the somewhat bearish (negative delta) call calendar diagonal strategy where the near month is shorted as well as being of a lower strike price and the further out month has a higher level strike price. Should all go well, the shorted call expires worthless, which creates a naked long call position that can become nicely profitable should the stock rally after the call shorted expires near or at zero value.

This is a medium risk trade as the entire risk is controlled, with high reward trade if the shorted call expires near or at zero value and the stock then begins its next upward/bull cycle.

Trades: Sell to hosed 3 KLAC December 46 calls at $3.20 and buy to open 3 KLAC January 48 calls for $3.00.

The total risk for this spread is $1.80 points as KLAC has traded ex-dividend for this quarter on November 9.

This content brought to you by TheStreet's OptionsProfits. Click here for a 14-day free trial.

OptionsProfits can be followed on Twitter at

T3Live can be followed on Twitter at

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters