In three days, families across America will gather to eat turkey, watch football, and lounge around. As usual, sports -- in this case football -- occupy a central role in the holiday celebration. Traditional rivalries in high school, college and the NFL dominate the landscape in most locales.
Interestingly, the rivalry that spawned the holiday culminated in a plentiful feast that allowed the respective parties to dine together. Therein lies the message, as well as the beauty of Thanksgiving: the ability to break bread with friend and foe alike.
Characteristically, Thanksgiving is a time to reflect on what we have, and be thankful. All too often, we ruminate about what we don't have, thereby dulling our appreciation for the bounties we do possess. Hopefully, we are thankful for the opportunity to live and flourish in a country that provides us with freedoms that people in other countries cannot even contemplate. I know that I am extremely thankful for the opportunity to express my views freely and openly on a regular basis. Moreover, I am grateful to
for affording me the space each week to share my views with you.
In my opinion, Thanksgiving is coming early to all of you who follow my lead regarding the two stocks I am recommending today.
All the Trimmings
Because of the recent energy pullback, we have an opportunity to buy one of the fastest-growing energy companies in the country at a
is an independent oil refining and marketing company that just announced the most profitable quarter in company history.
The company's balance sheet is nothing short of miraculous with total cash of over $285 million, over $5 per share, and a debt-to-equity ratio around 0.3. In addition, it has a forward price-to-earnings ratio of 8.14, a staggering 59.03% return on equity, and posted free cash flow of almost $150 million in the past 12 months.
And yet, Frontier Oil is trading about 25% below its 52-week high of $46.18.
What is the best way to start a position in Frontier Oil? I am recommending two ways: The first is to just buy the stock right here at Friday's close of $34.28, while setting a stop loss 5% below your purchase price. The reason I am not giving you an exact price where to set your stop loss is because Frontier Oil is below all of its major moving averages. Not to worry, with its earnings growth, if you get a chance to buy more at a lower price, I would add to your position instead of sell. I would look to take your profit anywhere near the 50-day moving average, which is just above $38.00.
The second way to take a position in Frontier Oil would be to buy a deep-in-the-money call. The option I recommend is an April $22.50 call, for approximately $12.70. This way, you only need to come up with $12,700, as opposed to $34,280 dollars to control 1,000 shares of Frontier all the way until the third Friday in April, April 21. I have a buy order in to do just that Monday morning.
My second pick is another example of my philosophy of buying quality companies at a discount.
is definitely a quality company and its stock is definitely being sold at a discount.
With a forward P/E of 16.77, a return on equity at an unbelievable 60.31%, free cash flow at $3.33 billion and almost zero debt, this is a company you definitely want to own, especially at this discounted price. Because the name "Dell" speaks for itself, I will jump right into how I would (and will) acquire this stock.
First, you could buy the stock outright, right here at $29.85 with a stop loss at the 52-week low of $28.82; as with Frontier I would add to the position if it gets to that level. I believe there are at least a couple points to the upside, with a target just above $32, right at the 50-day moving average.
Here is how I am going to take a position in Dell: on Monday morning at 9:30 a.m. EST I'm going to buy 10 of the February $25 calls for $5,400. That means I am only paying 55 cents in premium. Bottom line (assuming I get filled): I will control 1,000 shares of Dell stock at $30.40 (adding in the premium) all the way until the third Friday in February, for only $5,400, opposed to almost $30,000 for buying 1,000 shares of the stock.
There isn't much to report on
last week's picks, although I did add to my position in Symantec by buying the April $15 calls for $4.10, meaning I'm controlling another 1,000 shares for a modest a 70-cent premium.
Season of Thanks
As I move further and further away from my playing days, I become more and more appreciative of the career I enjoyed. I was incredibly fortunate to be able to fulfill the dream of many a young boy: to play baseball in the big leagues. Furthermore, the lessons I learned from baseball, in conjunction with the exposure I received during my career, have enabled me to pursue, and thus far, successfully negotiate a new path as an entrepreneur. Unequivocally, the self satisfaction associated with my accomplishments is significant. However, it pales in comparison to how incredibly grateful I am to be able to provide for my family.
Invariably, life presents us with obstacles that have a tendency to deflect our efforts to relatively unimportant things. Unfortunately, we sometimes become preoccupied with the minutia, such that the grand scheme not only becomes blurred, but it may become unrecognizable. Thanksgiving provides us with the opportunity to obliterate the minutia, and refocus our efforts on the grand scheme.
Capitalize on the opportunity to reunite with family members, regardless of the distance, real or perceived, that separates you. Cherish the thought of breaking bread with those you love as well as those who perhaps you don't love quite as much. By doing so, you may do far more than reconnect with loved ones; you may reaffirm yourself. Rest assured that both the Pilgrims and the Native Americans understood that:
Life is a journey. Enjoy the ride!
At the time of publication, Dykstra was long Symantec although holdings can change at any time.
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.