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Deere Disappoints Again

Wednesday, November 26th, 2008

Shares of Deere (DE, $30.26, down $2.84) are getting crushed this morning after the company missed Wall Street’s expectations once again. The company reported profits of $345 million, or $0.81 a share compared to last year’s quarter of $422 million, or $0.94 a share. Wall Street had expectations of $0.99 a share.

Back in May when Deere was at $80, the company missed estimates by a penny. In August, when the stock was at $60, they missed by four cents. Although I didn’t recommend any put option plays at the time, I did say “stay out of the headlights”.

And I said this:

“The sell-off in Deere has put the stock near its 52-week low but the real key was when the stock fell below $80. Once that happened you could clearly see the breakdown was coming. Deere’s earnings report was the straw that broke the camel’s back.”

Yeap, I blew this one. We missed the downtown train on that one, folks. Sorry. The Deere December 60 puts (DEXL, $30.53, up $2.63) were probably selling for $5 back in August…

Now the company misses by 18 cents a share. Of course, Wall Street’s only worried about the company’s agriculture equipment sales which are expected to grow only 5% next year, down from 15% not so long ago. Yikes.

Deere has gotten a 60% haircut in just six months and fallen from $80 to $30. The stock now has a PE of 6, a book value of $18 and trades at 1 1/2 times that. Historically, that is what you call a blue-light special. However, there is a new wave of the market that is being ushered in and people are trading instead of buying and holding.

I’ve been saying for years that the buy-and-hold theory has been dead money and it is only now that I am hearing the talking heads say the same thing. The real wealth in the market comes from option trading and here at OptionsMentoring.com, we can teach you this. There are so many strategies you can deploy in markets like these and it is one of the best environments ever to be trading.

There may come a time when Deere provides us with a trading opportunity to go long but there still appears to be some downside risk. Bearish options traders are targeting the December 25 puts (DEXE, $0.85, up $0.17) which have traded over 2,000 thus far.

Rick Rouse
Rick@OptionsMentoring.com

Tags: book value, Deere earnings, P/E's
Posted in Company Commentary, Earnings | No Comments »

Morgan Stanley Too Good to Pass Up?

Wednesday, September 17th, 2008

Morgan Stanley (MS, $18.10, down $10.60) is down $4+ from its opening price of $22.83 and $5 since my earlier blog. The opening price was nearly $6 lower from where the stock closed Tuesday. We are talking about a 35% drop in for a company that smashed Wall Street’s exceptations. Morgan announced early in an attempt to show the Street that it’s withstanding the financial turmoil that has dramatically affected Wall Street.

Morgan’s leverage ratios improved which is a good thing and both Morgan and Goldman Sachs (GS, $100.00, down $33.01) are performing far better than most other financial stocks despite declining profits. The thing with Goldman is that it is now trading a 1x book value. Goldman’s “supposed” book value is $99.

Yeah, it’s hard to trust the numbers but there is no more rulebook. The sell-off in some of these names are unbelievable. And while the sell-off can be swift from one day to the next, so can the rallies. Gold was up $50 to $829 this morning as the dollar was weakening.

The point is I think Morgan’s worth a flyer here at these levels and I’m looking at the October 20 calls (MSJD, $5.00, down $7.00) and the January 25 calls (MSAE, $4.00, down $4.18). Both calls have traded lower – the 20′s have traded as low as $4.40 and the 25′s have traded as low as $3.70. We could hit those levels again if the sell-off continues into the close but at some point the short-sellers are going to have to cover this stock.

Rick Rouse
Rick@OptionsMentoring.com

Tags: book value, Gold, Goldman Sachs, Morgan Stanley
Posted in Company Commentary, Gold | No Comments »

What's Wrong With General Electric?

Wednesday, June 25th, 2008

Shares of General Electric (GE, $27.59, up $0.19) hit a 52-week low yesterday before rebounding to close in positive territory. The stock hit a new low of $27.20 and is now down 25% for the year. GE has been in a major downtrend since announcing crappy 1Q earnings back in April. The stock was at $36.75 before their April announcement and fell $4.70, or 12%, the day they reported on volume of 366 million shares.

The big issue with GE is that in mid-March it had reaffirmed previous 1Q and yearly earnings guidance before dropping the “disappointment bomb” on Wall Strret. Not only did GE miss 1Q earnings ($0.44 versus expectations of $0.51), they said full-year earnings would be well below what they had forecast.

GE gets half its profits from financial services unit, GE Capital, which was where earnings took a hit. Most figured GE had kept the subprime damage in check but when earnings were revealed this division accounted for $0.05 of the $0.07 on the miss. The company rarely misses its numbers and many on Wall Street were stunned at just how far off GE was from estimates.

GE makes a variety of energy products and that will be the key driver of earnings over the next few years. The company is enjoying double-digit growth from the Infrastructure division but other areas have been “soft”. GE is still treading water and it may be a little too early to put the toes in the water. The company will be reporting earnings in the next 2-3 weeks and all eyes will focused on their numbers.

Like I said before, I’m not ready to purchase any call options on the stock just yet but I am watching the 2009 January 30 calls (VGEAF, $1.25, up $0.10) and the 2010 January 30 calls (WGEAF, $2.67, up $0.10). It may take a quarter or two for the company to gain Wall Street’s trust back but this stock is getting pretty cheap. Besides trading at a five-year low, the stock is sporting a juicy 4.5% dividend.

GE’s price/earnings ratio is under 13 and its price/book value ratio is a little over 2x. These ratios often help determine whether a stock is undervalued or overvalued. The higher both are compared to other stocks means the stock could be overvalued. A lower P/E or P/B could be mean the stock is undervalued and that appears to be the case with GE right now. However, I still don’t believe the stock is out of the woods just yet and I will also be watching to see what GE says when it reports earnings in July.

Rick Rouse
Rick@OptionMentoring.com

Tags: book value, General Electric, price/ earnings ratio
Posted in Company Commentary | No Comments »

Cooper Tire Going Flat

Wednesday, June 25th, 2008

Cooper Tire & Rubber (CTB, $7.92, down $0.37) delivered more bad news on Tuesday. The company said it is cutting 2Q production at its North American facilities, blaming lower tire demand and a possible shortage of raw materials. Cooper Tire was vague in its statement and did not say how much it was cutting production or where the cuts will take place. The cutback in production will cost the company up to $14 million.

This stock has been slammed and is now down roughly 75% from its 52-week high of $28.50. The sell-off in the stock accelerated in May on expectations that car sales would be weak and has continued through June. Cooper is suffering big-time from rising oil prices as petroleum is key to tire making and accounts for 60% of the products used in them. Over the past year, crude oil prices have more than doubled, from $55 a barrel to more than $135+ nowadays, which is affecting Cooper’s bottom line.

Last month, the company reported profits of $0.03 a share versus estimates of $0.10. Revenue for the quarter was $679 million, slightly less than the $680 million analysts had predicted. Yeah, it was a dismal quarterly report but there may be hope for Cooper.

The company reported sales in the International Tire Operations grew nearly 30% to $232 million due to increased volume and pricing. Cooper also repurchased 800,000 shares of its own stock for $14 million in Q1 and still has another $40 million set aside for additional buy-backs. And who’s to blame them? The fim has a book value of nearly $14 a share, meaning Cooper’s assets or an acquisition of the company would be worth this much. Of course there are many factors that make up a company’s book value but based on the share price, Cooper is trading for half its book value.

The biggest risk for the stock is rising raw material expenses which cost the company $6 million last quarter. These expenses represent a big risk for the company going forward (as if they already haven’t) and there’s no telling when Cooper will rebound. Certainly not anytime soon but with the China market representing the company’s next big area of growth, Cooper could be a stock worth holding over the next few years. There hasn’t been much action in the 2010 January 10 calls (YBGAB, $1.35) lately but they may also represent a good buying opportunity as well.

The aforementioned options do not expire for another 18 months and both the options and the stock could get cheaper in the weeks and months ahead. Let’s watch the stock over the summer and see how it reacts. By the time the fall and winter rolls around, which is traditionally Cooper’s strongest quarters, we should have a better idea of what lies ahead for the company.

Rick Rouse
Rick@OptionsMentoring.com

Tags: book value, Cooper Tire & Rubber, tire maker
Posted in Company Commentary | No Comments »

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SCOTT H.
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PETER G.
Rick & Team, GREAT Call on NKE for my two trading accounts:
1) Entry at .65, out at 1.45, 1.55 Profit = $415
2) Entry at .60, out at 1.75, 1.50 Profit = $485

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1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

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3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming.

C.J.
Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again!

SHAUN
Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace!

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I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good
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Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks.

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Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming.

NOEL
I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade.

TODD F.
Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today.

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What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you!

NOEL
“Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ”

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“I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.”

CHARLES M.
“I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.”

BRYAN C.
“I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.”

JOHN H.
“I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.”

JEFFREY
“Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.”

ED
“I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.”

GREG
“Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.”

KEN
“Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.”

GARETT
“Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.”

TERENCE
“Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.”

Jan. 31 2012
Rick, new member...Studied all current trades, did some chart work,picked ZNGA, PEP, MGM...Sold on Feb. 2 for $3600.00 profit...Cost for 1-year membership to your newsletter was less than $1000.00..All I have to say..Thank you. John H –

3/18/11
Rick, I purchased 10 contracts of the Nike March 85 puts Thursday afternoon for $2.00. Thing is, I was upset because the puts went down to $1.60 or so before the market closed. Well, needless to say Nike didn’t impress Wall Street and when I turned on the computer this morning the puts were worth $7.10! Sold them for a $5,100 profit!. Thanks again, you are the MAN. Chuck J-

2/3/12
Hi Rick,

I will start off with a thank you for your time and dedication to all
the research you and your team commit yourself to. This is not me just being excited about the profits I have accumulated aka (bank) ! You have helped me get back to the passion I had of researching stocks/options. Keith N-

Hi Rick,

I want to share my great results on GMCR. Based on your comments on February 15th, I bought 20 options at $0.28. They closed today at $7.00, which is a 2,300% gain. My $560 dollars turned into $14,000 in less than a month. In decades of trading, this is my single best trade ever. Thank you! By the way, the Dow was down 228 points today and I could care less. What a great trade. It proves the amazing power of options. I am so grateful for your service, which calls it straight all the time, your options trading manual, and most of all, your amazing skill
at finding winning trades. I have attached a copy of the trade from
my brokerage screen.

Posts Tagged ‘book value’

Deere Disappoints Again

Morgan Stanley Too Good to Pass Up?

What's Wrong With General Electric?

Cooper Tire Going Flat