Most of us learn at an early age that sharing is a positive thing. And the public companies that share the wealth with their shareholders via dividends have also historically benefited investors.
is one such company that shares its earnings, and if you go back 10 years, you will see that Wachovia has raised its dividend every year without fail. It also boasts solid revenue and profit growth. I am a proud customer of Wachovia myself, so I know it operates in four core businesses: capital management, banking, wealth management and corporate and investment banking.
But despite Wachovia's solid track record, its stock has been annihilated lately. Why?
Simply put: It's just Wachovia's turn. The Wall Street operators are positioning themselves to take aim at the financial sector, the one sector that has not participated in this bull market.
So we will
revisit the financial sector, just as we did on Monday with
. According to a Dow Jones report, in the past month the sector dropped more than 3.5%, making it one of the
When a sector gets hit like this, it generally means the stocks are on sale. With our deep-in-the-money calls strategy -- where we focus on choosing companies that are fundamentally strong and poised to rebound -- we can take our pick to the bank, so to speak.
Charlotte, N.C.-based Wachovia is considered a regional bank, with most offices located on the East Coast. However, regional or not, it has grown to be the fifth-largest bank in the U.S. in terms of market cap and revenue.
Wachovia has assets of $706 billion and deposits of $408 billion, and it reported $7.8 billion in net revenue in 2006. Wachovia has been growing earnings at a rate of 18.2%, and it has an exceptionally strong dividend yield. Also, for the sixth year in a row, Wachovia ranked No. 1 in the American Customer Satisfaction Index, a survey of customer satisfaction conducted by the University of Michigan's Ross School of Business.
The stock closed Tuesday at $50.56, a new 52-week low. This sets the stage for my DITM calls strategy: Buy 10 contracts of the January $45 (WBAI), paying $6.90 or better. Get ready to lock and load, while using limit orders.
This is the definition of a low-risk play. I envision this banking behemoth trading back at $55 before you can say A.G. Edwards!
Now to the Stat Book
This week we have wins with
Archer Daniels Midland
, bringing the total of the win column to $84,450 in just five months of trading, once again showing you the power of the DITM calls strategy that I share with you daily.
However, I'd like to point out a few adjustments to note on this week's Stat Book:
XM Satellite Radio's (XMSR) October $7.50 (QSYJU), adjust your good-till-canceled order from $5.50 to $5.10.
Bank of America's (BAC) August $42.50 (BACHV), adjust your GTC from $9.30 to $8.60.
Aqua America's (WTR) September $20 (WTRID), adjust your GTC from $3.70 to $3.20.
These options have been knocking on the door, and we have strong positions in each of them, owning 40 contracts. It's time to adjust the game plan to lock in our profits.
Always remember: Life is a journey; enjoy the ride!
At the time of publication, Dykstra was long Wachovia and JP Morgan.
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.