When you last heard from me, we were contemplating the yields on the Barry Bonds. Well, the short-term yields are that Barry has hit one homer in two weeks. Nonetheless, he is now deadlocked with The Babe at 714 career homers, 41 homers behind Hank Aaron's record of 755. The watch continues, with intermediate- and long-term yields to be determined.
Unequivocally, the best short-term results this year reside in the Motor City. Obviously, I am not referring to the automakers. Rather, I am talking about Jim Leyland and the phenomenal job he has done with the Detroit Tigers, who have the best record in Major League baseball. Speaking of phenomenal, can I buy a deep in-the-money call on Albert Pujols? With just over a quarter of the regular season completed, Pujols has 22 homers and 54 RBI. This guy is a bona fide superstar.
As for the divisional races, the Red Sox and Yankees continue to battle for supremacy in the AL East, while the White Sox are tailgating the Tigers in the AL Central. Both Western divisions are highly competitive, with all the teams within hailing distance of first place.
Led by Pujols, the Cardinals lead the NL Central, with the Reds and Astros several games back. My two former teams, the Mets and the Phillies, are first and second in the NL East. However, those ever-present Atlanta Braves, once nine games under .500, have quietly played their way back into contention. I must admit that I am not particularly fond of the Braves.
In fact, one of my most memorable post-season home runs was one
that knocked them out of the playoffs in 1993. I use to love "silencing the crowd" (similar to what I've been doing since I started writing and picking stocks for
). Nevertheless, the Braves have won 14 consecutive NL East titles; that certainly speaks to sustained excellence.
Similarly, there are companies who sustain excellence regardless of the challenges thrown at them over the years. In my opinion, the epitome of such a company is
Rest assured, when they step between the white lines, there is nothing soft about them, nor do they ever come up small. On the contrary, they always play hard and invariably come up huge! Therefore, do not be misled by their gentle moniker, Microsoft is a macro producer when it comes to hard cash! Hence, my ultimate deep-in-the-money call is Microsoft.
Before I explain why my pick this week isn't boring and makes sense, let me give you the in-the-money call we are going to use this week so we can continue to make money with my low risk-high reward strategy. We are going to buy the October $20 Microsoft in-the-money calls. The last trade on Monday for this particular in-the-money call was $3.50 (in recent trading Tuesday, the bid/ask was $3.80/$3.90).
The stock showed nice relative strength Monday, a day there was blood all over the streets. Don't think the public wasn't worried, talking to itself, wondering as the clock approached noon: "Is this it, how much lower can we go, is the market going to crash?"
Now let me tell you why these October $20 Microsoft in-the-money calls make so much sense. Assuming you buy 10 of these calls for $3,500, you are going to control 1,000 shares of Microsoft all the way until the Oct. 20 expiration, which is the third Friday in October. Remember, all options expire on the third Friday of every month.
Also, just to be clear, not only do you control 1,000 shares between the time you buy your in-the-money calls and the expiration date, you have the right to buy Microsoft common at your strike price, $20 in this case, if you so desire. I just wanted to mention that so you all know your options,
Now let's talk about Microsoft. Is it the best company in the world? I believe so. If someone can tell me a company that is better, I'm all ears! Just don't forget to compare apples to apples. What I mean by that is: Does the company have $33.51 billion in cash, like Microsoft?
After the company has paid all of its employees, basically, all of its bills, does the company have approximately $7 billion left over in free cash flow to do whatever it wants with it? I could continue, although I believe I've made my point. This company is so awesome, it's downright frightening! Microsoft has said it wants to return $75 billion of cash to shareholders through share repurchases and dividends, as well as the replacement of employee stock options with restricted stock grants.
Bottom line: We have approximately five months for this stock to "spike up" to the $24 dollar range (and that is being ultra-conservative). Remember, all we need is one bounce, one little run, and you will make your $1,000 in profit. But remember my rules: When your order gets filled for the in-the-money calls, you then need to set your good-till-cancel (GTC) limit sell order $1 above your purchase price; this way, you guarantee yourself a $1,000 profit if you bought 10 contracts.
Also, the great thing about a GTC order is that your order will get filled without you having to constantly check the tape or call your broker for a quote. You can simply return home from work in the evening, put your TV on
, and watch the man Jim Cramer. That's what I do, every night.
Life is a journey, enjoy the ride!
At the time of publication, Dykstra was long Microsoft calls.
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, including the world champion 1986 squad, and the Phillies in the early 1990s.
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.