Wednesday, September 27, 2006

Bought Some Altria (MO)

I have been looking to put some cash to work and Monday provided a decent buying opportunity in Altria (MO). I still believe shares are worth $92 if the company spins off Kraft. The speculated deal would be that for each share of Altria you would get 0.70 share of Kraft. The price of Altria would drop, but a 5% dividend yield would keep the stock around the $68 level.

Kraft: 0.7 * Kraft Price Per Share ($34.51 Per Share= 17*2007E) = $24
PMUSA & PMI: = $68 (Maintain a 5% yield $3.44 Dividend)
Altria Dividend might have to be lowered since it will no longer receive a dividend from Kraft.
My conservative value: $24+$68=$92

Note: I am long Altria (MO)

Friday, September 22, 2006

CVS Trade Update

Today I closed my position by selling the CVS Nov 30 call for an 8% return. I bought the contract yesterday speculating that CVS would "bounce." Today I got the bounce and realized a gain. CVS is still a good long term investment.

Thursday, September 21, 2006

CVS Trade

Today I went long the November 30 call for (CVS). S&P did a discounted cash flow analysis with a weighted cost of capital of 9% and found an intrinsic value of $36 per share. Today's selloff on the Walmart announcement will have little effect on sales at CVS. In my opinion, there is a sense of security getting a prescription filled at a pharmacy over a discount retailer. CVS will lose some customers but not enough to have a significant impact on the bottom line.

Monday, September 18, 2006

Buying Something Hated

The most hated sector right now is anything energy related. If you are looking for value and will forgo any momentum, then I suggest you take a look the integrated oil companies. My favorites include Suncor (SU) , Occidental (OXY), Chevron (CVX), and Conoco (COP). All are closer to their 52-week lows than their 52-week highs. And all now yield at least 2% (except SU). Suncor is the most levered to the price of crude with its Canadian Oil Sands.

From Bill Cara via Trader Mike
Credit Suisse says commodity crash likely over, Fri., Sept. 15, 2006, 12:59 PM

Sunday, September 17, 2006

Stocks to Watch

I am keeping an eye on Colgate (CL), Proctor & Gamble (PG), and Checkfree (CKFR) as potential longs. P&G and Colgate will see increases in their bottom line with lower raw costs and increased consumer spending due to lower energy prices. Proctor is more diversified than Colgate. Colgate is mainly toothpaste and soap. P&G has a top selling product in virtually every "beauty & health" and "household care" product division.

Friday, September 08, 2006

Stocks To Watch

I have compiled a list of a few stocks that have grabbed my attention as potential longs. The first stock is Checkfree (CKFR). It is 33% below its 52 week high, but has rallied in the past few trading sessions. Checkfree has a great business model and has low fixed costs. Checkfree offers companies the ability to process personal checks over the internet. They offer cheaper processing fees than Mastercard or Visa. Earnings are expected to grow between 12-14% annually for the next five years.

USG Corp. (USG) manufactures and distributes building supplies. Despite the housing bubble, commercial real estate is booming. Sales of USG's dry-wall continue to see record demand and pricing (PDF). The stock has a black cloud hovering over it with a $4 billion asbestos trust liability pending. I believe most of the $4 billion liability is already priced into the stock. Keep in mind that Carl Ichan has a large short position in this stock. Warren Buffett has been buying up shares under $47. Buffett now owns over 17% of USG. The recent decline in the stock is due to a rights offering. Which created more dilution (doubled the share count). The offering gave shareholders in July of 2006 the right to buy one additional share of USG for each share owned for $40.

Altria (MO) is a stock that I already own but would consider buying more at current levels. The stock is somewhat oversold in the short term. I still believe shares are worth $95 if the company is broken up. Altria also recently raised its quarterly dividend 7.5% to $0.86 per quarter.

Tuesday, September 05, 2006

Silver Wheaton (SLW) Analysis & Trading Videos

Be sure to check out TraderMike.Net for his technical analysis of Silver Wheaton (SLW). A different Ben requested the chart. I have a lot of respect for Mike as he got me out of Titanium Metals (TIE) near its high in mid May. I own some shares of SLW and I know a few readers also own some shares. Also be sure to check out the trading videos linked on the left side of his website. They are good videos for those interested in learning more about technichal analysis.