| StockFetcher Forums · General Discussion · Interviews | << 1 ... 25 26 27 28 29 ... 41 >>Post Follow-up |
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1/28/2018 10:51:09 PM Selling Pricey Stocks, Buying Cheap Options – Barron's This article was originally published on this site https://darwininvestingnetwork.com/selling-pricey-stocks-buying-cheap-options-barrons/ 1/22/218 As each day passes, it is increasingly difficult to know if every new piece of information will be the straw that ends this historic stock rally, or if the market mob will keep interpreting every news item as a reason to send prices higher. This conundrum, which has many investors wondering what to do, is best addressed with options. Implied volatility, which is the essence of options prices, remains at incongruously low levels that have not been witnessed in at least 50 years. Stock prices, of course, are at record levels. This divide between two related markets is best bridged by selling high-priced stocks and buying low-priced options. Such an approach enables investors to secure unrealized capital gains that are, for many investors, likely at the highest levels in their investing lives. That this stock-replacement strategy remains more of a talking point than a widely used solution is yet another reason why the timing is right now to practice the time-honored tradition of buying low and selling high. “Broad stock replacement is not typically a concept we would discuss in January,” Jim Strugger, a derivatives strategist at MKM Partners, recently advised clients. “Seasonally, it’s more apropos in the fall when investors are looking to monetize gains while maintaining single stock exposure. But it’s Jan. 22, and the Standard & Poor’s 500 index has gained 5.1% this year. It doesn’t require a calculator to simply annualize that to a 60%-plus gain for 2018.” Many stocks are actually up even more sharply than what is implied for the S&P 500. Consider Netflix (ticker: NFLX). The stock is up 90% over the past year. A solid earnings report pushed Netflix to new highs above $272 last week. The trade, for those who own the stock: sell some stock, take the profits, and buy calls that expire in January 2019 to maintain upside exposure at a fraction of the cost and the risk. The January $275 call that expires in 2019 was recently trading around $33. If Netflix is at $400 at expiration—and why not swing for the fences on a stock that’s up over 40% so far this year —the call is worth $125. Should Netflix stock slip below $275 at expiration, the trade fails. Strugger screened S&P 500 stocks for market capitalizations exceeding $500 million with options open interest exceeding 20,000 contracts that also have a 14-day Relative Strength Index above 80 (the S&P 500 is at 80.6). The average return for these 20 names, which include BlackRock (BLK), Mastercard (MA), Fluor (FLR), Best Buy (BBY), and PayPal Holdings (PYPL), was 23.4% over the past three months, versus 9.1% for the S&P 500. CONSIDER FLUOR, up about 40% in three months. In the third quarter, 49% of the company’s revenue came from the energy, chemicals, and mining segment, so it makes sense that the shares have rallied coincident with rising crude oil and energy equities. The stock’s Relative Strength Index, a momentum indicator, is about 93.7, which is very high. Strugger likes buying Fluor’s July $62.5 calls for around $3.50. If an investor owned 100,000 shares, for example, 2,000 calls could be bought with only 12% of the capital from the equity position. At day’s end, we care little about which way markets and stocks trend. There will always be puts and calls to take advantage of this quirk or that opportunity. However, what we are mindful of is that consistently successful investing involves putting process before profit and risk before return. Right now, the stock-replacement strategy can help investors maintain their discipline and secure incredible profits, while still participating in the greatest, most powerful bull market in modern history. STEVEN SEARS is the author of The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails. Comments: steve.sears@barrons.com Follow: @sm_sears |
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1/30/2018 9:50:45 AM https://www.marketwatch.com/story/amazon-berkshire-hathaway-and-jpmorgan-health-initiative-send-industry-shares-plummeting-2018-01-30 == Shares of companies across the health care industry, from health insurers to distributors, pharmacy-benefit managers and drugmakers, dropped in premarket trade on Tuesday after Amazon, Berkshire Hathaway and JPMorgan Chase announced plans for a new company that aims to improve their employees’ health care. The news hit pharmacy-benefit managers, pharmacy chains and drug distributors among the hardest, with CVS Health Corp. CVS, -5.42% shares dropping 7.6%, Walgreens Boots WBA, -3.26% shares dropping 5.7%, Express Scripts Holding Company ESRX, -9.90% dropping 4.8% and Cardinal Health Inc. CAH, -3.70% shares dropping 4.3%. Several health insurers’ shares also fell significantly, including UnitedHealth Group UNH, -4.38% which dropped 7.2%, Anthem Inc. ANTM, -4.35% , which dropped 7%, as well as Aetna Inc. AET, -2.85% and Humana Inc. HUM, -2.13% Read: Health care company shares drop sharply on entry by Amazon, Berkshire Hathaway and JPMorgan The Amazon AMZN, -0.52% Berkshire Hathaway BRK.A, +0.06% BRK.B, +0.02% and JPMorgan JPM, -0.39% initiative aims to improve health-care outcomes for employees in a cost-effective way. It will be “free from profit-making incentives and constraints,” and will focus on the beginning on technology solutions, the companies said. |
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2/2/2018 3:29:21 PM https://www.whitecoatinvestor.com/student-loan-refinancing/ |
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2/3/2018 11:24:02 AM https://www.desmoinesregister.com/story/news/politics/2018/01/24/democrats-propose-iowa-retirement-savings-plan/1063716001/ == "The proposal would require all businesses that do not currently provide a retirement savings plan to give employees the opportunity to automatically invest a portion of their paycheck in a Roth IRA." "Iowa Senate President Jack Whitver, R-Ankeny, expressed doubt Wednesday when asked about prospects for the retirement savings legislation. "I think generally most people feel the private sector is filling that void fine, and anything that doesn’t add an additional $500,000 of spending at this time would probably be a good thing," Whitver said." |
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2/3/2018 12:12:18 PM http://capitalallocatorspodcast.com/2018/01/08/mauboussin/ Michael Mauboussin currently is the Director of Research at BlueMountain Capital, a multi-billion dollar hedge fund and asset manager. He spent the majority of his professional career thinking and writing about decision making, behavior and complex systems, with long stints at Credit Suisse and nearly a decade alongside Bill Miller at Legg Mason. Michael has been an Adjust Professor at Columbia Business School for 24 years. Our conversation covers Michael’s early career, the paradox of skill, academic research more favorable to active management, decision-making, optimal size and composition of teams, unsettling features in the market, data analysis in sports, career risk, the Santa Fe Institute, and Michael’s new research on the horizon. |
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2/3/2018 7:54:49 PM http://capitalallocatorspodcast.com/bet/ The Bet Warren Buffett and Ted Seides, CFA |
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2/3/2018 11:48:20 PM https://www.aqr.com/-/media/files/papers/aqr-words-from-the-wise-ed-thorp.pdf Ed Thorp |
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2/5/2018 10:57:30 PM https://contrarianoutlook.com/3-steps-to-51-returns-in-5-months-with-dividend-payers/ == 3 Steps to 51% Returns in 5 Months with Dividend Payers Brett Owens, Chief Investment Strategist Updated: January 31, 2018 Looking for dividend payers with the most price upside? They’re available, even in this pricey market. You just need to follow the free lunch signs… Five months ago, I told readers to grab the “hurricane dip” in the best reinsurers. My Hidden Yields subscribers specifically were told to buy shares in Validus (VR) on September 15. Why reinsurance? Why then? And why Validus? Let’s answer these three questions, because they’re the reason Hidden Yielders woke up to 44% gains last Monday morning (and banked 51% total returns in 5 months). This “Free Lunch” Was Cashed at Once (for 51% Gains) (Then I’ll share my top 7 dividend growers with 51% upside by July 4th, too – for those of you who missed our reinsurance party.) Step 1: Pick a Great Business Model The first step to successful investing is to buy fantastic businesses. And if insurance is a great business, then reinsurance is indeed a fantastic one. (Reinsurance is insurance purchased by insurance companies to manage their own risk exposure.) Insurance itself, when done responsibly, is a cash cow. Firms collect payments up front from their customers but may not have to pay it out in claims for a long time, if ever. The companies then invest that money – called “float” – and pocket the income they earn. If they priced risk properly up front, they make more on premiums than they have to pay out in claims. Plus, they get to keep the profits they made on the capital they borrowed for free! These big cash flows let reinsurers do three things regularly: Return lots of money to shareholders as dividends and stock repurchases, Compound those gains every year (which results in more repurchases and higher dividends), and Withstand capital drawdowns caused by hurricane season. Great economics is a promising start. Next, we need a whiff of fear to buy at a favorable price. Step 2: Buy During Disaster In September, I wrote: Reinsurers usually emerge from hurricane season relatively unscathed. And they tend to outperform the S&P 500 every September (along with most other months on the calendar, too). Take these two leading stocks in the space – they usually to selloff in late summer, and rebound quickly: An Almost-Annual Buying Opportunity And these are price gains only (before dividends). The smartest reinsurers pay plenty of dividends because they are extremely capital efficient. The reality is, disasters are (paradoxically) great for savvy reinsurers. Catastrophes can take out weaker competition, and give the strong firms a reason to raise rates. Which means those that can foot the one-time bill can enjoy higher profits in the years (and even decades) ahead. Hurricane fears had Validus selling for a song. It was fetching just book value – which is liquidation value. If you buy at book, you’re getting enough collateral to cover your investment in full – and you’re receiving the actual business for free! And Validus was selling for exactly book in September. Investors who purchased the stock at cheap moments like those had timed price dips (orange line below) quite well: Buy At or Below Book (Blue Line) for Best Bargain It sure felt “different that time” with a row of raging hurricanes lined up in the Atlantic. But it wasn’t. American Insurance Group (AIG) recently looked at the same numbers (and perhaps our September issue of Hidden Yields!) and realized that Validus was still a great buy at 1.5 times book value – a 50% premium to its free lunch price: A Bargain 50% Higher, to AIG Why’d AIG choose Validus? For the same reasons we did. Step 3: Buy the Best Company Validus (VR) has grown its book value plus dividends (BVPS) by 11.4% annually since its IPO: Validus Compounds by 11.4% Yearly Want to make 12%+ per year forever from stocks? Buy firms that compound cash this fast. As Warren Buffett does with Berkshire Hathaway, Validus emphasizes its growth in BVPS to gauge value creation for shareholders. Book value reflects the amount of money its assets would fetch today if the firm were liquidated – a relatively accurate measure because its balance sheet consists of bonds and other securities with active markets for them. And dividends, of course, are cash in your pocket. This excellent long-term track record is due to smart underwriting. This is reflected its impressive “combined ratio”: Combined Ratio = (Incurred Losses + Expenses) / Earned Premiums A ratio below 100% indicates an underwriting profit – which means the business is profitable thanks to savvy underwriting alone. From there, the income generated from investing the float is gravy – potentially a lot of gravy, and not required to run the business! Validus has always been good at making money by simply writing policies. The firm boasted an 84.2% combined ratio last year. That’s $0.158 on the dollar in free money up front. Sixteen cents on the dollar may not sound like much, but this is additional free money the firm can invest for extra profits. It’s why insurance (and especially reinsurance) is an even better business than banking – these companies not only get paid by their customers to invest their money and pocket the profits, but if they’re good at writing policies, they don’t even have to give all the original cash back. I was actually sad to see Validus bought out nine days ago. Sure, the 44% morning returns helped ease the heartache – but I never like to lose a cash cow that compounds our money at 12% per year. That said, our herd remains strong in the face of an overheated stock market. We have seven buys that are doubling their dividends every few years. And by now, you know what that means – their stock prices will double too. 7 “Free Lunch” Dividends to Buy Now for Quick 51%+ Upside Life is too short to waste our time with middling dividends! Since share prices move higher with their payouts, there’s a simple way to maximize our stock market returns: Buy the dividends that are growing the fastest. Don’t be fooled by modest current yields. They often don’t capture the growth potential (and it’s the dividend’s and cash flow’s velocity that really makes us big money – as Validus showed us – rather than its starting point). How to we buy high velocity dividends, the buyout candidates of tomorrow? It’s a simple three-step process: Step 1. You invest a set amount of money into one of these “hidden yield” stocks and immediately start getting regular returns on the order of 3%, 4%, or maybe more. That alone is better than you can get from just about any other conservative investment right now. Step 2. Over time, your dividend payments go up so you’re eventually earning 8%, 9%, or 10% a year on your original investment. That should not only keep pace with inflation or rising interest rates, it should stay ahead of them. Step 3. As your income is rising, other investors are also bidding up the price of your shares to keep pace with the increasing yields. This combination of rising dividends and capital appreciation is what gives you the potential to earn 12% or more on average with almost no effort or active investing at all. Which future buyout candidates should you purchase today? Well you know me – I’ve got three best buys – plus four more bonus dividend growth stocks – that should safely double your money every two or three years. It’s a simple formula – their dividends are doubling often, which means their prices will rise in tandem. At the same time, we’ll collect their dividend payments today and enjoy an even higher income stream tomorrow. This dividend growth strategy has produced amazing 30.3% annualized returns for my Hidden Yields subscribers since inception. In two-plus years, we’ve crushed the broader market by more than 50%. If you achieve returns of 30.3%, you’ll double your money in almost two years. So if you haven’t been following this strategy, why not? The best time to get started is right now – before the seven dividend growers I mentioned begin to move. Click here and I’ll share their names, tickers and buy prices with you right now. |
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2/7/2018 9:16:57 PM SMBU Covered Calls - PRO and CON |
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2/8/2018 7:09:48 AM https://finance.yahoo.com/news/jp-morgan-launches-long-short-231211939.html "JP Morgan launched a new fund on Jan 25, 2018, JPMorgan Long/Short ETF JPLS, focused on providing long-short exposure to equity factors with a dynamic beta." JPLS ----------------- LISTED IN ARTICLE -------------- FTLS DYLS HTUS |
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