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Dykstra: Glaxo Option Opportunity

The pharma giant stands to reward investors.

GlaxoSmithKline (GSK) - Get Report is one of the top five pharmaceutical firms in the world. Headquartered in the U.K. with operations in the U.S., Glaxo has an estimated 7% of the world's pharmaceutical market.

The company's top product is the asthma medication Advair, which combines with two of the company's other products, Flovent and Serevent, to form a single, twice-daily treatment. Other bestsellers include the herpes treatment Valtrex, antidepressants Paxil and Wellbutrin, migraine therapy Imitrex and antibiotic Augmentin.

Here are some key statements I pulled off of the GSK Web site:

  • "Every second ...we distribute more than 35 doses of vaccine.
  • "Every minute ... more than 1,100 prescriptions are written for GSK products.
  • "Every hour ... we spend more than $562,00 to find new medicines.
  • "Every day ... more than 200 million people around the world use a GSK brand toothbrush or toothpaste.
  • "Every year ... our factories produce 9 billion Tums tablets, 6 billion Panadol tablets and 600 million tubes of toothpaste."

While doing my research, I found that GSK has an experimental malaria vaccine that cleared another hurdle by proving safe in a small group of infants and by reducing the rate of malaria infections in the group by 65%, according to a new study of the shot, which has been under development for years.

When I look at the stock, its daily chart shows support at $51.00 and a bullish technical pattern known as an inverse head-and-shoulders bottom, which should take the stock back to its 200-day simple moving average at $54.13. ValuEngine has a fair value price of $58.99, so shares are 12.6% undervalued.

Today, I will use GlaxoSmithKline (GSK) as my deep in-the-money call pick and will place limit order at $9.80 to buy 10 May 42.50 (GSKEV) calls.

Game of Life

The National League representative in the World Series has already been determined, and the American League representative may be established tonight. The Colorado Rockies should be endorsed by a broom company, as they have swept both of their opponents, the Phillies and the Diamondbacks, to claim the National League pennant. Moreover, the Rockies have won 21 of their last 22 games in an incredible late-season run, which required them to beat the San Diego Padres in a one-game play-in just to get to the postseason. Fueled by excellent pitching, timely hitting and superb defense, the Rockies have eight days off before the World Series begins on Oct. 24.

Unfortunately, most of America has missed out on the heroics of Matt Holliday, Kaz Matsui, Yorvit Torrealba and their Rockies teammates. The National League Championship Series on TBS drew an average 2.8 television rating for all households, thereby establishing it as the lowest-rated league championship series in history.

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In the ALCS, the Indians own a commanding 3-1 lead over the Red Sox, with the possible clincher tonight at Jacobs Field in Cleveland. Game five pits game-one starters Josh Beckett for Boston and C.C. Sabathia for Cleveland against one another again. Beckett has been a postseason marvel, while Sabathia was battered unmercifully in game one.

If the Red Sox are able to win tonight, the series would then shift back to Boston for the final game or games. Regardless of the outcome of the ALCS, the possibility of snow during the World Series must be entertained.

In NFL news, the San Diego Chargers, rejuvenated after La Dainian Tomlinson's four-touchdown performance against the Raiders, upgraded their wide-receiver corps by obtaining Chris Chambers from the Dolphins, for a second-round draft pick in 2008. Despite their slow start, the Chargers are tied with the Chiefs atop the AL West.

In college football, the University of South Florida Bulls get a chance to justify their lofty No. 2 ranking in the BCS when they play Rutgers tonight. If they emerge victorious over the Scarlet Knights, the Bulls will have cleared their biggest hurdle to an undefeated season.

Gatorade announced that it will introduce "Gatorade Tiger" in March 2008. The endorsement deal between Gatorade and Tiger Woods is purportedly for five years and could potentially be worth as much as $100 million to the world's greatest golfer.

The Players Club recognizes that Gatorade replaces essential electrolytes that are lost during the heat of competition. Furthermore, we appreciate how taxing and debilitating athletic competitions can be. By guaranteeing recurring cash flow, through our strategic partner, The Players Club endeavors to ensure that our members' cash reserves are never depleted, such that they can replenish and revitalize other areas of their lives.

Always remember: Life is a journey; enjoy the ride!

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."