Buying Stocks at a Discount

TEO and BMRN

Ideas in the Week Ahead section from Stock World Weekly, Greece Meets Kafka, Feb. 12, 2012

We have a couple of bullish trade ideas this week (although we are not as out-and-out bullish as Barron’s Jeremy Siegel). Scott of Sabrient submitted, “Telecom Argentina SA (TEO, $19.94) provides telecommunication services in Argentina. Mobile phones have provided solid growth for TEO. TEO announces earnings on Feb 17, 2012, and the estimates easily support the dividend of $2.21 per share which is a 10.8% yield paid once per year (April). Latin America is likely going to experience stronger growth than most of the world, driven by rising disposable incomes. I believe the stock is attractively priced to buy/hold through the dividend and then like selling covered calls to enhance the yield.”

Pharmboy follows up with some thoughts on what to do with the profits realized from his virtual trade ideas in the opening section. He wrote, “With some of these gains, I think it is wise to start looking for sound companies that will weather the potential rocky waters that could come. BMRN ($37.21) is a solid company. Its principal products include Naglazyme, a recombinant form of N-acetylgalactosamine 4-sulfatase enzyme used to treat a genetic disease mucopolysaccharidosis (MPS)VI; Kuvan tablet, a proprietary synthetic oral form of 6R-BH4 indicated for patients with Phenylketonuria (PKU), a metabolic disease; Aldurazyme for the treatment of mucopolysaccharidosis I, a genetic disease; and Firdapse for the treatment of lambert eaton myasthenic syndrome, an autoimmune disease. 

“I think of the company as a teenage Genzyme and would like to establish a small position in BMRN by buying 100 shares for $37.21 and selling a July $35 call and put for $6.80 or better combined. The spreads are large in the options, so patience will be needed.”

For some recent examples of how to buy stocks for a discount, click here. 

The Relentless Pursuit of Meaningless Metrics (Excerpt)

Excerpt from Stock World Weekly, "The Relentless Pursuit of Meaningless Metrics."  (Feb. 5, 2012)

We have a trade idea from Scott at Sabrient. Scott submitted “AGCO Corporation (AGCO, $52.84) has the makings of a stock ripe for long exposure. AGCO is the third largest farm equipment maker in the world and has reported better-than-expected earnings results in the last four quarters. Analysts are expecting the company to report $1.33 on February 7, 2012, and it is trading at a forward P/E of 10. AGCO is the #9 ranked stock in the Sabrient Baker’s Dozen 2012. These have collectively gained over 15% in the first month of trading.” (For downside protection, a call can be written (sold) on 100 shares of the stock .)

Our resident biotech trader, Pharmboy, submitted two trade ideas: 1) “Infinity Pharmaceuticals (INFI, $6.95) was punished last week for a failure in a clinical trial for a very difficult cancer to treat. Its drug is similar to that of Curis (CRIS), and I want to take advantage of the volatility and sell a put to see if we can get into a play. Sell the April $7.5 put for $1.40 or better. 

2) Trius Therapeutics (TSRX, $5.57). The company is in clinical trials with an antibacterial compound and it just registered to sell 8.6M shares. I like scaling back into a position, so buying 200 shares in here, looking to get the position up to 500 over time, if it does not move back up quickly. There are no options on TSRX.”

For some recent examples of how to buy stocks for a discount, click here. 

Disclaimer
Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results. We make no representations that the techniques used in our rankings or selections will result in or guarantee profits in trading. Further, our analyses are based on third-party data, which we cannot guarantee as to adequacy, accuracy, completeness or timeliness. We accept no responsibility for any loss arising for use of these materials.
Hypothetical or simulated performance results have certain limitations unlike an actual performance report. Simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under or over compensated for the impact, if any, of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.