Sept. 18 (Bloomberg) — International Business Machines Corp. shares rose for a seventh straight day in the longest streak in more than two years, spurred by analysts’ predictions of wider profit margins.
IBM, based in Armonk, New York, added 23 cents to $122.11 at 4 p.m. in New York Stock Exchange composite trading. The shares, up 45 percent this year, last had a seven-day rising streak in May 2007.
IBM, the world’s largest provider of computer services, increased its profit margins in July for the seventh straight quarter. The company has focused on more-profitable software and services, rather than hardware, and shifted jobs to lower-cost regions. Since July, more than half of the 26 IBM analysts surveyed by Bloomberg have raised their price targets — many saying that profit margins have room to grow.
Wall Street has underestimated IBM’s earnings this year because it hasn’t taken the company’s profit margins and dependable revenue sources into account, Rob Cihra, an analyst at Caris & Co. in New York, said in report today. He increased his price target $10 to $145, making him at least the fourth analyst to predict that IBM shares will reach $140 or more.
Earlier this month, the company reaffirmed its full-year profit forecast of at least $9.70 a share and said it’s “well ahead” of a 2010 goal of at least $10 a share. Software and services now make up more than 80 percent of the company’s profit. That’s helped buoy earnings even as the recession crimps sales.
Sanford C. Bernstein & Co.’s Toni Sacconaghi, the top- ranked analyst by Institutional Investor, boosted his target by 7.7 percent to $140 last month, citing the potential for wider margins. This month, Kathryn Huberty, an analyst at Morgan Stanley, increased her target price for IBM to $145 from $116.
Rising to at least $140 would set a record for the stock, which reached a high of $137.88 in July 1999.
IBM expanded profit margins in all units except for hardware and financing last quarter. The company’s gross margin, or the percentage of sales left after production costs, increased to 45.5 percent from 43.2 percent a year earlier.
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WASHINGTON (Reuters) – U.S. securities regulators proposed on Thursday a ban on flash orders that stock exchanges send to a select group of traders, fractions of a second before revealing them publicly.
The Securities and Exchange Commission is seeking to end the practice criticized for giving an unfair advantage to some market participants who have lightning-fast computer trading software.
Nasdaq OMX’s Nasdaq Stock Market and privately-held BATS Exchange recently canceled their flash services that disclosed buy and sell orders to specific trading firms before sending them to the wider market.
NYSE Euronext’s New York Stock Exchange did not adopt the flashes under scrutiny but major alternative venue Direct Edge still offers flashes.
The SEC will put its proposal out for public comment for 60 days, and will later schedule a meeting to decide whether to adopt the proposal.
The agency said it will seek feedback on the cost and benefits of the proposed ban, and whether the use of flash orders in options markets should be evaluated differently from those in equity markets.
The agency also tightened rules on credit rating agencies by imposing more disclosure requirements and encouraging unsolicited ratings. Those moves, and others proposed by the SEC, took aim at an industry widely criticized as having fueled the financial crisis through over-generous ratings assigned to toxic mortgage-backed securities.
The proposed ban on flash orders is part of a broader effort by the SEC to crack down on obscure corners of the U.S. stock market.
SEC Chairman Mary Schapiro said the agency will keep reviewing trading practices that may give an unfair advantage to some market players. “Other market practices may have similar opaque features,” she said.
Supporters of high-frequency trading practices such as flash trading say they add needed liquidity to the markets, and allowed the markets to function smoothly during the financial crisis.
But critics, including some lawmakers, say the markets need to be better policed so all investors are operating on an even playing field.
In July, Senator Charles Schumer, a New York Democrat, told the SEC to curb flash trading and threatened the agency with legislation if it failed to do so.
Schumer said in a statement on Thursday that flash trading could seriously undermine fairness and transparency in markets.
“This ban, as proposed, is pretty much water-tight and should not be weakened by the commission as the rule-making process goes forward,” he said.
Joe Mecane, NYSE Euronext’s executive vice president of U.S. markets, has said flashes were “a relatively small debate that evolved into a very large debate.”
At most, flashes represented less than 3 percent of U.S. equity trading volume.
All five SEC commissioners voted to propose the flash trading ban, but some were cautious about overreaching in reviewing other market practices.
Troy Paredes, a Republican commissioner, said investors ultimately benefit from regulatory restraint. “Exchanges and other trading venues need flexibility to innovate new products, services and trading opportunities,” he said.
Democratic commissioner Elisse Walter also cautioned against too broad a crackdown and said each trading practice should be examined separately and carefully.
“They have different potential benefits and different concerns,” Walter said.
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Adobe Systems Inc.’s offer to buy Omniture Inc. of Orem for $1.8 billion should mean accelerated growth for the largest high-tech company headquartered in Utah.
Adobe said Tuesday it is willing to pay a premium price to acquire Omniture in the biggest high-tech deal in state history. If the transaction closes during the fourth quarter as expected, Omniture will become a new business unit within Adobe but remain in Utah.
Omniture co-founder and CEO Josh James is to join Adobe as senior vice president of the new business unit. James said Tuesday that the acquisition should allow Omniture to more quickly reach its goal of a billion dollars of revenue a year. It had about $350 million in revenue in 2008.
“They’re one of the largest software companies in the world, and this is going to be one of the largest parts of their business and one of fastest growing parts of their business,” James said. “So they’re going to actually invest in and really grow this business.”
That expansion should mean additional employees in the future, he said of the company that employs 600 or so people in Orem and 1,200 worldwide.
“We’re going to continue to grow rapidly and right here in Utah,” said James, who cofounded the company in 1996 while a student at Brigham Young University.
Adobe is offering $21.50 a share cash for the Utah company, about 24 percent above its closing price on Tuesday.
Sasa Zorovic, an analyst at Janney Montgomery
Scott LLC in Boston, called the sale price a “very generous offer.”
“Adobe may be paying a premium for Omniture, but the deal makes sense,” said Zorovic. “From the perspective of Web designers [using Adobe’s products], many will be very interested in seeing how their work is performing.”
Omniture has been the fastest-growing or second-fastest publicly traded U.S. software company the past three years, James said. It is the leading company for software tools and services to track Web page traffic and improve online marketing. Among its customers are eBay, Wal-Mart, Microsoft, Neiman Marcus, Oracle and Sony.
Adobe is best known for its graphics design tools that include Illustrator; its Flash software that allows videos, animation and interactive elements to be placed on and viewed over the Web; and for Photoshop, its digital photograph processing software. Web page builders turn to Adobe for design tools that include DreamWeaver, another of its acquisitions.
In a conference call with analysts and the news media, Adobe President and CEO Shantanu Narayen said the deal made sense for his company because customers who buy its software tools to create Web sites were demanding ways to measure how effective they are in selling goods and services.
“What is interesting is a number of these companies actually wanted us to integrate with these solutions like Omniture,” Narayen said.
He also said the cultures of the two companies were similar, making for an easier merger.
“One of the very attractive parts [of Omniture] is the people and the culture,” he said. “They have a real passion for solving company problems, a history of delivering innovative products.”
James said he felt comfortable that Omniture employees would continue to have a good environment. Adobe was No. 11 on the Fortune 100 list of best places to work, he said.
“That’s really important for me in this type of a combination. One of the things you value is taking care of your people.”
Narayen declined to comment on whether there were other bids for the company.
If the deal closes, it will leave James with $25.4 million for his 1.18 million shares of Omniture.
“They want me to keep running this business,” he said. “They want our people to keep running this business.”
The announcement came after the close of the markets on Tuesday. Omniture’s shares finished at $17.32 Tuesday, then soared $4.47, or 25.8 percent, to $21.79 in after-hours trading.
Adobe’s shares took a hit in after-hours trading, falling $1.50, or 4.2 percent, to $34.12. The stock had closed at $35.62 in regular trading earlier Tuesday.
Reporter Steve Oberbeck contributed to this story.
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If you thought medical stocks tend to be less volatile in price action and earnings performance, a bit of research confirms that notion.
IBD screened for stocks with the steadiest earnings performance over the past three years plus low betas (which measure price activity in relationship to the S&P 500).
Specifically, the EPS Stability Ratings for this research were 5 or less, and the betas were 0.75 or less.
Of 12 stocks that qualified, eight were in health care.
PSS World Medical (PSSI) corrected a relatively moderate 39% in the bear market. Its earnings results haven’t been so steady, ranging from flat to 47% the past eight quarters. Still, the medical products and equipment distributor earns a 93 EPS Rating.
Hospital company Universal Health Services (UHS) has posted EPS gains of 9% to 35% the past eight quarters. It’s near a new high after plunging 56% last autumn.
Medco Health Solutions (MHS), the pharmacy benefits management firm, has made calm price moves, aside from sharp volatility last October and in February.
Cerner (CERN) makes software for medical records and doctors’ office management. Its EPS gains ranged from 8% to 33% the past 12 quarters.
Qiagen (QGEN) is a Dutch company that develops tests for the virus responsible for cervical cancer. It also makes products for diagnostic labs, researchers and for other fields.
Zacks Earnings Preview: Adobe Systems, Best Buy, FedEx, Kroger, and Oracle © Thomson Reuters 2009 All rights reserved
Zacks.com releases the list of companies likely to issue earnings surprises.
This week`s list includes Adobe Systems (Nasdaq: ADBE), Best Buy (NYSE: BBY) and
FedEx (NYSE: FDX). To see more earnings analysis, visit
Every day, Zacks.com makes 4 stock picks available, free of charge. To see them,
go to http://at.zacks.com/?id=5612.
The Week’s Events
This week brings the initial batch of third-quarter results. Seven early
reporters from the S&P 500 – all of whom have quarters ending in August – will
report, including: Adobe Systems (Nasdaq: ADBE), Best Buy (NYSE: BBY), FedEx
(NYSE: FDX), Kroger (NYSE: KR), and Oracle (Nasdaq: ORCL). In total, we will see
results from 20 companies.
So how will the third-quarter look? The Zacks Consensus Estimate calls for S&P
500 earnings of $13.50 per share, a 15.4% decline from a year prior.
Going back to the week’s events, the economic calendar will stay busy with
inflation, manufacturing and housing data being released.
* Tuesday: August Producer Price Index (PPI), August retail sales, September
Empire State survey, July business inventories
* Wednesday: August Consumer Price Index (CPI), August industrial production and
capacity utilization, September NAHB housing market index, weekly crude
inventories, weekly mortgage applications
* Thursday: August housing starts and building permits, September Philadelphia
Fed survey, weekly initial jobless claims, weekly natural gas inventories
President Barack Obama will speak about the financial crisis on Monday, which is
also the anniversary of Lehman Brothers’ collapse. The same day, Fed Governor
Elizabeth Duke and Richmond Federal Reserve Bank President Jeffrey Lacker will
give speeches. Duke will discuss regulation and accounting at the AICPA’s annual
conference in Washington D.C. Lacker will appear before the Charlotte chapter of
the Risk Management Association.
Friday will be a quadruple witching day. Stock option contracts, stock futures
contracts, market index options and market futures contracts will all expire.
This could lead to increased volatility.
We are in a fear and greed market with a relatively small group of traders
playing hot potato. Bonds are doing extremely well (fear), while the S&P 500
continues move higher (greed). It doesn’t make sense, but stocks are trending
higher. Dow 10,000 is only a few good days away and the fast money remains in
Companies That Could Issue Positive Earnings Surprises
One analyst just raised his fiscal third-quarter profit forecast on Adobe
Systems (Nasdaq: ADBE). The revision pushed the Zacks Consensus Estimate a penny
higher to 28 cents per share. The most accurate estimate is more bullish at 32
cents per share. Though the software company has only matched expectations over
the past 2 quarters, it did top during the previous 4 quarters. Adobe is
scheduled to report on Tuesday, Sep 15, after the close of trading.
Three analysts raised their fiscal second-quarter projections on Best Buy (NYSE:
BBY) over the past few weeks. The changes have resulted in a Zacks Consensus
Estimate of 41 cents per share, a penny higher than the average forecast of a
month ago. The most accurate estimate is slightly more bullish at 42 cents per
share. BBY has topped expectations for 3 consecutive quarters. Best Buy is
scheduled to report on Tuesday, Sep 15, before the start of trading.
FedEx Corporation (NYSE: FDX) preannounced fiscal first-quarter earnings of 58
cents per share today. The number is well above both the company’s guidance and
the Zacks Consensus Estimate of 43 cents per share. Fiscal second-quarter
guidance also looks strong at a range of 65 to 95 cents per share. Though the
surprise should be baked into the price, if reaction to the conference call is
favorable, there is the possibility of additional upside. FDX is scheduled to
report on Thursday, Sep 17, before the start of trading.
Charles Rotblut, CFA, is the senior market analyst for Zacks.com.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that “Earnings estimate revisions are the
most powerful force impacting stock prices.” Since inception in 1988, #1 Rank
Stocks have generated an average annual return of +26%. During the 2000-2002
bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled
-37.6%. Also note that the Zacks Rank system has just as many Strong Sell
recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988,
Zacks Rank #5 stocks have significantly underperformed the S&P 500 (-0.8% versus
+8%). Thus, the Zacks Rank system allows investors to truly manage portfolio
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Big week ahead on Wall Street By Alexandra Twin, CNNMoney.com senior writer
One year after Lehman Brothers, the stock market is right back where it was. Beyond the anniversary, reports on the consumer loom.
NEW YORK (CNNMoney.com) — Reports of the stock rally’s demise have been greatly exaggerated, with September so far managing to eschew a much-predicted selloff. A torrent of economic news this week could turn the tide.
On the economic front, the consumer will remain front and center: Reports are due on inflation, retail sales, housing and jobless claims. These reports are key as investors look for signs that the consumer — hit by rising joblessness, lost wealth and tighter credit — is starting to recover.
Consumer spending fuels two-thirds of economic growth. Government stimulus and a period of inventory building are expected to help the economy for the next few quarters, but experts say the U.S. is at risk for a double-dip recession by this time next year if spending doesn’t return.
“The week is likely to be a competition between better economic news for August and the start of the quarterly pre-announcement period,” said John Canally, Economist at LPL Financial.
Investors will also keep an eye this week on the dollar, which is sitting near a one-year low versus the euro and nine-month low against the yen. The falling dollar has helped push the price of gold to a record high of $1006.50. Meanwhile, crude oil prices are back around $69 a barrel.
The news this week will also compete for investor focus with the one-year anniversary of one of the grimmest periods in Wall Street history: the collapse of Lehman Brothers.
One-year later: Last September, the collapse of Lehman and shotgun wedding buyout of Merrill Lynch by Bank of America turned a recession into a full-blown economic crisis on a level not seen since the 1930s.
Through extraordinary efforts on the part of the U.S. government and central bankers and financial ministers around the world, a so-called second Great Depression was avoided.
Relief that the crisis was contained — combined with massive amounts of fiscal and monetary stimulus — have enabled stocks to recover over the past six months.
Since bottoming in March at 12-year lows, the S&P 500 has rallied 54% and the Dow 47%. The Nasdaq bottomed at a six-year low and has gained 64%.
Back at ’08 levels: But the rally, sharp though it has been, has merely returned the major indexes to right where they were a few weeks after Lehman’s collapse. Wall Street’s mood is also roughly back to where it was right before the collapse.
The CBOE Volatility index, or the VIX, Wall Street’s fear gauge, closed Friday at the lowest point since Sept. 8, 2008. Typically, the VIX and the stock market move in opposite directions.
Despite calls for a fall selloff, stocks have so far managed to hang on to gains this month and even move higher.
“What’s interesting is that the economy was worse a year ago and the market was higher than it is now, which suggests we still have room for stocks to keep rising,” said Paul Brigandi, vice president of trading at Direxion Funds.
On the downside, trading volume has been light, Wall Street insiders have been selling and so-called average investors have been pulling money out of stock and stock mutual funds.
Tracker Trim Tabs said equity mutual funds and ETFs are on track to post the first monthly outflows since March.
Investors who have remained on the fence or who have cashed out will sort through the next wave of economic news for confirmation that a recovery is brewing or that the market has way outpaced any stabilization.
Monday: One day ahead of the Tuesday anniversary of Lehman’s bankruptcy filing, President Obama will speak in New York about the steps his administration has taken to try to contain the crisis and prevent that kind of collapse from happening again.
Tuesday: August retail sales are due in the morning from the Commerce Department. Sales are expected to have risen 1.9% after falling 0.1% in July, according to a Briefing.com survey of economists. Sales excluding autos are expected to have risen 0.4% after falling 0.6% in July.
The Producer Price index, a measure of wholesale inflation, is expected to have risen 0.8% in August after falling 0.9% in July. The so-called Core PPI, which strips out volatile food and energy costs, is expected to have risen 0.1% after falling 0.1% in August.
The Empire State manufacturing index for September is also due before the start of trading. The index is expected to have risen to 15 from 12.8 in the previous month.
A report on business inventories is also due during the day, but it is not typically a market mover.
Wednesday: The Consumer Price index, a measure of consumer inflation, is due in the morning. CPI is expected to have risen 0.3% in August after showing no change in July. The so-called core CPI is expected to have risen 0.1% after rising 0.1% in July.
August capacity utilization and industrial production are also due in the morning, along with the weekly oil inventory report.
Thursday: August housing starts and building permits are due from the Commerce Department. Starts and permits had dipped in July after showing some improvement in June. Investors will be looking to see some stabilization in the August numbers.
The weekly jobless claims numbers from the Labor Department are also due on Thursday. The number of Americans filing new claims for unemployment is expected to have risen to 555,000 from 550,000 in the previous week.
Continuing claims, a measure of those receiving benefits for a week or more, is expected to have risen to 6.114 million from 6.088 million in the previous week.
The Philadelphia Fed index for September is also due.
Friday: The federal government will release state-by-state employment reports for August.
Friday is also the quadruple options expiration, a quarterly event when stock index futures and options, and individual stock futures and options are all expiring at the same time. That can create volatility in the days leading up to the expiration and the day of the expiration.
Tuesday: Best Buy (BBY, Fortune 500) is expected to report quarterly earnings of 41 cents per share in the morning versus 48 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters.
After the close, software maker Adobe Systems (ADBE) is expected to report quarterly earnings of 34 cents per share versus 50 cents a year ago.
Last week, FedEx boosted its forecast to 58 cents per share versus an earlier call for a profit of 44 cents per share, due to stronger international results and cost cutting. The package delivery firm earned $1.23 per share a year ago.
Indian Stocks Advance; Wipro Leads Gains on Revival Expectation By Rajhkumar K Shaaw
Wipro, the nation’s third-biggest software services provider, gained 1.4 percent after the Economic Times said the company has lifted a freeze on promotions and salary increases, suggesting higher profitability. Infosys Technologies Ltd., the No. 2, gained 1.2 percent to its highest in more than 2 1/2 years after the Organization for Economic Cooperation and Development said its leading economic indicator suggests recovery is under way in most member economies. Jaiprakash Associates Ltd. lost 1.9 percent after data showed India’s industrial growth slowed.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 47.4, or 0.3 percent, to 16,264.3, after swinging between gains and losses at least 20 times. The gauge gained 3.7 percent this week. The S&P CNX Nifty Index on the National Stock Exchange rose 0.2 percent to 4,829.55. The BSE 200 Index advanced 0.1 percent to 1,984.48.
“The fundamentals of the global economy seem to be improving,” said Suraj Saraogi, managing director at Keynote Capital Ltd. in Mumbai. “We are positive on the markets in the long term.”
Wipro gained 1.4 percent to 550.95 rupees after the Economic Times said the company’s decision may be “the first signs of a turnaround in the information technology sector.” Infosys rose 1.2 percent to 2,267.4 rupees, its highest since February 2007. Tata Consultancy Services Ltd., the No. 1 software services company, climbed 0.7 percent to 560.35 rupees. Indian software exporters derive 40 percent of earnings from the U.S.
The Organization for Economic Cooperation and Development said its leading economic indicator increased by 1.5 points in July from the previous month to a reading of 97.8, which was 1.9 points lower than a year earlier, the Paris-based organization said today.
“Clear signals of recovery are now visible in all seven major economies,” according to a statement from the organization today, referring to the Group of Seven nations. It highlighted France, Italy, China, Russia and India as showing significant improvements, adding that “the signs from Brazil, where a trough is emerging, are also more encouraging.”
The OECD’s leading economic indicator aims to signal when the direction of the economy is changing, with any level below 100 signaling contraction.
While not in the OECD, China’s indicator gained 1.6 points and India’s increased 1.3 points in July.
Overseas funds bought a net 2.47 billion rupees ($51 million) of Indian stocks on Sept. 9, the Securities and Exchange Board of India said on its Web site. The funds have bought 417.8 billion rupees of the nation’s stocks this year to date, compared with record net sales of 530 billion rupees for the whole of 2008.
Jaiprakash lost 1.9 percent to 228.4 rupees after the statistics agency said the nation’s industrial output rose 6.8 percent in July, less than the revised 8.2 percent gain in June.
The increase in output at factories, utilities and mines was less than the median estimate of 7 percent predicted by economists surveyed by Bloomberg News before June’s figure was revised higher.
“The numbers are below expectation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai.
Maruti Suzuki India Ltd., the maker of half the cars sold in India, lost 1.4 percent to 1,468.6 rupees. Tata Motors Ltd., India’s biggest truckmaker and owner of Jaguar Land Rover Ltd., fell 2.2 percent to 550.3 rupees. Bharat Heavy Electricals Ltd., whose turbines and generators light up three of every four homes in India, dropped 0.5 percent to 2,256.45 rupees.
Sterlite Industries (India) Ltd., the biggest copper producer, retreated 2.6 percent to 746.2 rupees after its parent raised a bid for Asarco LLC to $2.56 billion from $2.29 billion.
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16 Breakout Stocks on Unusually High Volume
In this post are 16 stocks which I will be keeping an eye on at least until September options expiration. These stocks have showed great strength, breaking out to the upside on extremely large volume. The table below shows the company, ticker, Wednesday’s $ per share and % increase, and Wednesday’s volume increase (% increased compared to 50 day average).
|Company||Ticker||$ / % Change||% Vol. Increase|
|Applied Micro Circuits Corporation||AMCC||+0.77 (8.61%)||380.83%|
|Hi-Tech Pharmacal Co.||HITK||+4.16 (24.10%)||759.25%|
|MoneyGram International, Inc.||MGI||+0.33 (11.30%)||168.18%|
|VIVUS, Inc.||VVUS||+4.89 (70.77%)||9979.10%|
|AllianceBernstein Holding LP||AB||+1.46 (6.25%)||219.53%|
|Signet Jewelers Ltd.||SIG||+2.64 (10.76%)||307.75%|
|Cano Petroleum, Inc.||CFW||+0.130 (17.79%)||352.58%|
|Capstone Turbine Corporation||CPST||+0.19 (13.97%)||249.83%|
|JDA Software Group, Inc.||JDAS||+3.15 (16.07%)||177.75%|
|Parallel Petroleum Corporation||PLLL||+0.39 (18.75%)||907.15%|
|Quest Resource Corporation||QRCP||+0.131 (30.44%)||854.06%|
|MGM MIRAGE||MGM||+0.68 (7.23%)||143.19%|
|MSC Software Corp.||MSCS||+0.52 (6.83%)||224.54%|
|Rovi Corp||ROVI||+0.80 (2.56%)||19.81%|
|Delta Petroleum Corp.||DPTR||+0.75 (32.89%)||1735.69%|
|Gasco Energy, Inc.||GSX||+0.120 (31.58%)||930.78%|
Vivus certainly had a wonderful day on the back of some very positive news, but I feel I may have missed the majority of the move, as news caused that to rocket. The stocks which are most attractive to me from the list above are: Hi-Tech Pharmacal Co., JDA Software Group, Inc., Rovi Corp, and MGM MIRAGE – ROVI and MGM did not have any direct headlines causing Wednesday’s share price and volume increase.
Below are two option trade ideas which I may be using in the week(s) to come on ROVI and MGM. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.
ROVI Option Trade: Settling at 32.11 a share as of Wednesday, it is hard to use options with this stock as it is almost exactly in between the two strike prices listed of 30 and 35. Therefore this is an ideal candidate for a vertical option spread. I would get long this by purchasing the in-the-money 30 strike October option contract and selling the October 35 strike against it. To open each spread I would need to commit $245, but the stock is already 2.11 in-the-money so in order to break even the stock needs to climb higher by 34 cents per share. If the stock sells off and approaches the 30 mark, I may look at just going long by purchasing the 30 strike call options and wait for strength in the underlying to write out the 35 strike option. If the stock continues to rally and closes at or above 35 a share on Friday October 16, 2009 this position will return just over 104%.
For traders I would recommend using a ratio call spread. At current levels of delta, I would consider selling two or three 35 strike call options against the underlying, and if and when the lower delta and 2X or 3X the higher delta value start to equal, I would close the spread. This is much more dangerous than a vertical spread because it requires naked options and not only do maintenance requirements become a hassle, but if the stock really takes off this spread could lose a lot of money. The maximum profit point is at 35 a share, and should be closed by the end of trade on October options expiration day.
MGM Option Trade: I have been bullish on the casino stocks for quite a while, as they are trending up and the extremely high premium (due to the high levels of volatility on the underlying) makes them great for the buy/write option strategy. Like I did for Las Vegas Sands (LVS), I have been looking at using the buy/write option strategy and or selling put options for MGM. As the stock hovered above $10 on Wednesday I was trying to open a buy/write but my bid was not getting hit. I was bidding $9.40 a share, or $10 a share less $60 per option contract for the September 10 calls. I did not fill my order, so will certainly be looking into this until expiration. I would like to open it by Friday, as the theta value on the September 10 option is quite high and I would like to be able to benefit from the time decay experienced over the weekend. I think this stock could sell off significantly with any weakness in the overall market, and if so I will look at using this strategy centered around the September 9 call, or will look to sell September put options. If I happen to get into this position and then the stock sells off causing me to hold this stock after expiration, I would simply look to write it out for the month of October on strength in the underlying.
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Sept. 9 (Bloomberg) — Capital International’s private- equity fund sold a 3.9 percent stake in MindTree Ltd., the Indian computer-services provider set up by former Wipro Ltd. executives, according to a Bombay Stock Exchange filing.
The Capital International Global Emerging Markets Private Equity Fund sold 1.52 million shares at 540.02 rupees each of the software developer, according to the data yesterday.
The Franklin India High Growth Companies Fund, the Franklin India Taxshield Fund and the Franklin India Flexi Cap Fund acquired 1.03 million shares at 540 rupees each, according to exchange data. Credit Agricole Asset Management bought 200,000 shares in Mindtree, according to the filing.
Capital International’s private-equity fund owned a 10.97 percent stake in MindTree, according to a filing by the company for the quarter ended June 30. Capital Group International, Inc. had over $171 billion in assets under management as of Dec. 31, according to the company’s Web site.
MindTree rose 3.2 percent to 541.50 rupees in Mumbai trading yesterday.
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- Pike Electric (NASDAQ:PIKE) upgraded to Buy from Hold at BB&T ; price target $15
- General Electric (NYSE:GE) upgraded to Overweight from Neutral at JPMorgan
- LM Ericsson (NASDAQ:ERIC) upgraded to Hold from Sell at Deutsche Securities
- Allstate (NYSE:ALL) gets it price target raised to $44 from $40 at FBR Capital
- Costco (NASDAQ:COST) upgraded to Overweight from Neutral at Piper Jaffray
- American States Water Company (NYSE:AWR) upgraded to Buy from Hold at Brean Murray ; price target set at $42
- QLogic (NASDAQ:QLGC) gets its price target raised at RBC to $19 from $17
- FBR Capital is raising National Semiconductor’s (NYSE:NSM) price target to $17 from $13 ahead of earnings on September 10
- Intercontinental Hotels Group (NYSE:IHG) upgraded to Outperform from Neutral at Credit Suisse
- Suncor Energy (NYSE:SU) upgraded to Buy from Hold at Stifel Nicolaus ; price target raised to $39
- Deutsche Bank raises Lubrizol’s (NYSE:LZ) price target to $75 from $65
- McDermott (NYSE:MDR) upgraded to Outperform from Neutral at Credit Suisse ; price target is raised to $31 from $27
- Cadbury Schweppes (NYSE:CBY) upgraded to Neutral from Underperform at Credit Suisse
- Micron (NYSE:MU) upgraded to Buy from Neutral to UBS ; price target raised to $9 from $7.50
- SW Energy (NYSE:SWN) upgraded to Buy from Hold at Stifel Nicolaus ; price target raised to $56
- Morgan Joseph recommends buying shares of AMGN, IMGN, and ISIS on the bases of having attractive valuations and key upcoming catalysts in the next 3-6 months
- ThinkEquity raises Pharmasset’s (NASDAQ:VRUS) price target to $29 from $18
- Goldman Sachs upgrades Red Hat (NYSE:RHT), and VmWare (NYSE:VMW) to Buy from Neutral
- Pacer Intl (NASDAQ:PACR) upgraded to Neutral from Underperform ; price target is raised to $4 from $3
- FBR Capital is raising XL Capital’s (NYSE:NSM) price target to $21 from $18
- Panera Bread (NASDAQ:PNRA) upgraded to Buy from Neutral at Bank of America/Merrill
- Nice Systems (NASDAQ:NICE) upgraded to Buy from Neutral at UBS
- Pharmasset (NASDAQ:VRUS) upgraded to Underperform from Neutral at Robert W. Baird ; price target is raised to $30 from $16
- Cavium Networks (NASDAQ:CAVM) upgraded to Buy from Hold at Roth Capital ; price target is raised to $25 from $15
- Broadcom (NASDAQ:BRCM) upgraded to Buy from Hold at Roth Capital ; price target is raised to $34 from $22
- NetLogic (NASDAQ:NETL) upgraded to Buy from Hold at Roth Capital ; price target is raised to $50 from $40
- American Intl (NYSE:AIG) downgraded to Underperform from Neutral at Credit Suisse ; price target lowered to $15 from $30
- Lihir Gold (NASDAQ:LIHR) downgraded to Hold from Buy at RBS
- PG&E (NYSE:PCG) gets its price target raised to $49 from $40 at Argus
- Goldman Sachs downgrades BMC Software (NYSE:BMC), and Symantec (NASDAQ:SYMC) to Neutral
- Patni Computer Systems (NYSE:PTI) downgraded to Neutral from Positive at Susquehanna Financial
- Goldman Sachs cuts Ameristar Casinos (NASDAQ:ASCA) and Penn National Gaming (NASDAQ:PENN) to Neutral from Buy
- Shaw Group (NASDAQ:SHAW) downgraded to Neutral from Outperform at Credit Suisse ; price target $33
- Tenneco (NYSE:TEN) is removed from Americas Conviction Buy list at Goldman Sachs
- Ryanair Holdings Plc (NASDAQ:RYAAY) initiated as an Hold at Deutsche Securities
- Plains Exploration (NYSE:PXP) initiated with a Buy at Global Hunter Securities ; price target $42.50
- NuVasive (NASDAQ:NUVA) initiated with an Outperform at Cowen
- Vantage Drilling (NYSE:VTG) initiated with an Outperform and price target of $2.25 at FBR Capital
- Globe Specialty Metals (NYSE:GSM) initiated with a Buy at Jefferies & Co ; price target $10
- Ocwen Financial Corp. (NYSE:OCN) started as an Outperform at Keefe Bruyette with a price target of $14
- American Dental (NASDAQ:ADPI) started as an Outperform at Robert W. Baird with a price target of $17
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