Many readers have asked for a "cheaper" selection, and today I will offer a look at Walter Industries (WLT) , a company that was featured in Barron's this weekend and is poised for a nice move. But first let me discuss what is "cheap."
While the definition of cheap varies depending on the context, Walter Industries meets many of these definitions. In general, when I choose a stock for my deep-in-the-money call, I look for stocks trading below what I believe to be their fair market value. Then, if the "premium," or the price paid to control 1,000 shares, is $1 or better, I usually will employ my deep-in-the-money calls. (There are exceptions when I pick more volatile stocks.)
However, what I believe many readers are looking for is a selection that requires less money down for an investment, which makes sense. I am here for you, but let me remind you that options are a dangerous game.
If you do not take the time to do your homework and understand what I am trying to accomplish when I use deep-in-the-money calls, you will never be in a position to take advantage of what I am trying to teach you. I stay up all night studying stocks and using my resources to help you get better, because at the end of the day, it's all about results, my friends! That's the bottom line! Now back to today's pick.
Walter Industries, which closed at $24.75 on Friday, conducts its business in coal and natural gas, as well as additional operations in homebuilding and financing. In its present state, Walter is classified as an industrial conglomerate, like two of my past picks,
. However, the reason for optimism with Walter stems from its core business.
The company experienced production problems at its Alabama coal mine, but those issues are now behind Walter, and
claims that total coal production could rise to 7 million tons, which would lead to a 17% increase in profit. In addition, the company's primary product, metallurgical coal, is used in steel production and has been rising in demand. These production problems contributed greatly to the decreased value of the stock. Last year at this time, Walter's stock traded in the $60s and approached $70 in value.
A key to the long-term optimism on this company is that Walter is spinning off some noncore assets. The company recently spun off its water products division,
Mueller Water Products
, and it seems as though the board is focusing on streamlining its business operations.
During the spin-off, outgoing CEO Gregory Hyland (who left to head Mueller Water) purchased an additional $250,000 worth of stock. This is surely a sign of strength in the company. Should Walter spin off its homebuilding and financing operations, the core company should see a nice increase in value.
Walter's stock should benefit greatly from its strong fundamentals and improved operations. The company boasts an unbelievable 100% ROE (return on equity). The stock stands up technically as well. The 50-day moving average, which had been moving downward for nearly a year, began leveling off in early March and looks poised to turn upward. In the last two weeks, the stock price has been hugging the 50-day moving average tightly. Additionally, the stock's relative strength index (RSI) and rate of change both confirm an impending reversal in Walter's stock for the near future.
With the possibility of a "
bounce" combined with a strong chart, the deep-in-the-money calls once again provide an excellent opportunity to profit. To do so, I have in place a limit order to buy 10 contracts of the September 20 in-the-money calls (WLTID) at $5.70 or better. Please be patient and let the price come in for the GTC order to be filled.
Game of Life
Michael Phelps capped off a brilliant week, winning seven gold medals in seven races at the World Swimming Championships in Melbourne, Australia, to equal the performance of Mark Spitz in the 1972 Olympics in Munich, Germany. Unfortunately, Phelps was denied a chance to capture an eighth gold medal, as the U.S.'s 400-meter medley relay team did not qualify for the final. Nonetheless, Phelps' performance, albeit not in the Olympics, borders on the incredible.
Major League Baseball began officially last night with the World Series champion St. Louis Cardinals playing the New York Mets, in a replay of last year's National League Championship Series. In a reversal of the NLCS, the Mets emerged victorious Sunday behind a fine outing by Tom Glavine. A full slate of games is on tap for today. Remember, everybody starts out tied for first place, and 162 games give you ample opportunity to show your true self. April is an important month, in that while you cannot win a championship this month, you can lose one.
There will be a major championship decided tonight. The combatants have worked diligently all season to get to this moment. They dedicated their offseasons to reach this moment. Films were continuously reviewed, opponents scouted and strategies devised to pounce on any weakness that was unearthed. Both have conquered the vast majority of their foes; however, both have experienced the inevitable setbacks. As would be expected, both possess tremendous leaders who emphasize the importance of teamwork. Both utilize state-of-the-art technology in order to master their craft.
Moreover, both are tremendously capable of the quick strike, with the potential for a knockout blow. Just as easily, they are similarly adept at utilizing the clock, if necessary. While both possess phenomenal defensive skills, ultimately, the contest will be decided by the team who provides the greatest offensive thrust. That invariably involves the "closers," the guys who seemingly are immune to pressure and can finish the deal. A loss for one could shatter lifelong dreams; a loss for the other could result in the demise of America.
Yes, folks, there will be an epic battle waged tonight, but it will not be Florida vs. Ohio State, in a repeat of the BCS Championship. Rather, it will be a battle for the TV viewership between the NCAA Basketball Championship and
, featuring arguably the greatest finisher today, Jack Bauer. Both possess die-hard fans, but for those who have overlapping loyalties, who do you die for? Luckily, for some of us, TiVo can help us to bypass that decision.
The Players Club recognizes that life sometimes presents us with these extremely difficult dilemmas. Furthermore, managing one's money can present just such a dilemma. Therefore, the Players Club is dedicated to providing athletes with guaranteed recurring cash flow, such that they can focus their energies on solving the other dilemmas in life.
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 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.