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 The Street.com 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.
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. Dell ( DELL) 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.