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Archive for February 13th, 2013

Posted by Martin February 13, 2013

Is MCD providing a buy opportunity?

Is MCD providing a buy opportunity?

Today news came up about a possible margin squeeze affecting restaurant chains. Higher commodity costs, frugal consumers, possibly a higher minimum wage could possible affect earnings of companies such as McDonald’s (MCD), Chipotle (CMG), Subway and Panera (PNRA).

How serious this is?

I hold MCD in my portfolio. It pays dividends and current yield is at 3.24% with dividend growth at 14%. The free cash flow rate, 5yr average is 13.4%, earnigs growth 23.8%, EBIDTA 19.8% and my annual expected return is at 9%.

The company is followed by 44 hedge fund managers. One of their rules to add shares into their portfolios is that at least one executive officer should buy the company stock. In November last year this exactly happened and the stock has risen 8% since then.

So smart money are buying the stock.

The stock was very extended since November last year with a nice drop in price in December 2012 when I pick up some shares. Will today’s price action offer the same opportunity?

MCD provides buy opportunity

Will the stock, squeezed by panicking investors provide a similar opportunity as it happened in November and partially in December?

Time will show, however, this price action activated my attention to this stock and I will be adding more shares to my portfolio. I am going to wait for tomorrow morning to see what the stock is going to do. If it continues falling I will track my buy order lower as well, if it reverses I might cancel the trade and wait further.

Posted by Martin February 13, 2013

New Trade – MBIA Inc (MBI) put selling

New Trade - MBIA Inc (MBI) put selling

Today I execute the trade on MBIA Inc (MBI) which i wrote about yesterday. I sold 1 put contract against this stock.

What is the game plan?

I will be selling puts against this stock, but trying to avoid assignemnt. If it however happens and I get assigned or won’t be able to roll the put out and away I will start selling covered calls as long as I get assigned again and get rid of the stock.

Today I sold one put contract against MBI and collected $118 premium.

02/13/2013 09:30:09 Sold 1 MBI Aug 17 2013 9.0 Put @ 1.18

If I get assigned I will buy MBI for $9.00 and my cost basis will be at $7.82 (less the premium). If I gett assigned, I will start selling covered calls as I did previously with this stock.

If the stock stays above the strike price, the put expires worthless and I’ll keep the premium and repeat the process. Also if the stock manages to run up and the put becomes worthless prior to its expiration I may consider buying the put back and selling new further in time. I’ll keep posting the progress of this trade.