On Tuesday, I readdressed the Comcast (CMSCA) deep-in-the-money, or DITM, pick.
Before I get to today's pick and a rundown of previous picks in the Stat Book, I want to reiterate that it's very important to see that in any situation there is a plan. Many readers have asked me to provide an in-depth step-by-step plan for each option, but that is just not possible when dealing with the stock market.
However, as the saying goes, there is a method to this madness.
Stock prices reflect all information that is available on that stock and the macroeconomy, so as new information comes to light, the situation with each individual equity changes. I enter each position with a detailed game plan that relies on fundamental and technical analyses.
As a baseball player, it was always important to review the scouting report and tapes on each pitcher I faced, but it was also important to adapt my own approach at the plate to each situation. It's no different trading stocks.
Once I am in, I am constantly readjusting my buy levels and monitoring when to sell out of a position. For less experienced investors who want to keep a more active grasp on their trading, I urge you all to closely monitor the 50-day and 100-day simple moving averages in order to see both support and resistance levels for each of your present and potential positions.
I generally believe in patience, hence my appreciation for the good-till-cancel order. But sometimes it's necessary to take what the market offers. With Comcast, although the option price never reached our sell level, we still locked in a very strong gain.
This week has been an exceptionally strong one for the DITM strategy.
International Game Tech
all closed for wins and all well within a month of our purchase dates.
Although some consider this the product of a bull market, there is much more going on than just that. These have been value selections where I've paid a minimal premium on stocks at the right times. A bull market generally yields higher premiums on option selections, yet these picks have provided extraordinary amounts of leverage, minimizing risk and exposure and yielding timely rewards.
Today, I am going to take a look at another beaten-down company,
. YRC is a less-than-truckload shipping company, meaning the company consolidates small loads into a single truck.
This stock has lost 15% of its value since reporting disappointing earnings on April 27. Earnings were hurt by an extended winter, as well as tougher-than-expected economic conditions. In addition, management lowered guidance for the 2007 and 2008 fiscal years because of concerns over a slowing economy.
YRC's stock took too big a hit, but it held support at around the $39 level and should once again regain value. Although management provided cautious estimates based on the potential for tough economic conditions, the negatives are built into the stock price already. After all, this company trades at a P/E of 9.65 and a forward P/E of under 8, nearly half those of small-package shippers
, whose stocks and earnings have faced similarly tough times of late.
Furthermore, at the annual meeting, management expressed its desire to focus more on expanding operations into one of the world's fastest-growing economies -- China. The company has made acquisitions in the area and will double its workforce in the region. Although these efforts will not be reflected immediately in the earnings report, management's proactive stance and the future earnings potential should result in at least a partial recovery of the stock's lost value in the past month.
In order to implement the deep in-the-money strategy with YRC, I have placed a limit order to buy 10 October 30s (YUXJF) at $10.00 or better.
Now, let's take a look at the updated Stat Book.
Remember: Life is a journey; Enjoy the Ride.
At the time of publication, Dykstra was long CMCSA.
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.