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May 2010

Recs

4

One more pipeline company: TransCanada (TRP)

May 29, 2010 – Comments (0) | RELATED TICKERS: TRP

TransCanada has pipelines carrying gas through Canada to America. While TransCanada's regulatory framework in Canada is less favorable than the US, and this pipeline company has diluted its moat somewhat by entering into the utility business. However, it's well worth considering - the stock yields over 4.5% now and is undervalued. TransCanada is a C-corp, meaning no K1 forms or tricky tax considerations. It's well worth considering. I would prefer Spectra Energy over Transcanada, though.  [more]

Recs

4

Buying call options

May 28, 2010 – Comments (0) | RELATED TICKERS: GENZ.DL

Buying a call option on a stock is the same as buying the right to the upside from the stock. In buying calls, I usually want to maximize leverage in that I want to put up the minimum amount of capital for the maximum amount of gain. This means buying the longest-dated calls, to give an investment thesis enough time to play out.  [more]

Recs

3

A cautionary note about options

May 27, 2010 – Comments (9) | RELATED TICKERS: WFC

A recent Bloomberg article described how amateur options traders are proliferating. The article described how several investors were down by several thousand dollars, or several tens of thousands of dollars, at several points during their options careers. A lot of this speculation was done with IRA money. Folks, this is bad and this is not how anyone should invest in options - unless you are doing this with the 5% of your portfolio earmarked as fun money.  [more]

Recs

2

Selling long-dated puts to get a discount on stock

May 24, 2010 – Comments (3) | RELATED TICKERS: XOM , NVS

Exxon Mobil is trading just above $60 right now. Exxon isn't a very volatile stock. If I told you that you could buy it for just under $52, would you?  [more]

Recs

3

Other investment ideas: my favorite MLPs

May 22, 2010 – Comments (1) | RELATED TICKERS: EPE.DL , ETE

I've long been pounding the table on the strongest MLPs. This year, I was finally proven right, as they kept increasing their dividends and their stock prices rebounded sharply. However, many of them have moved sharply downward in this correction. I suspect, but obviously cannot prove, that it's a few big investment banks moving out.   [more]

Recs

1

Exelon: sell a split-strike combo

May 22, 2010 – Comments (2) | RELATED TICKERS: EXC

Exelon is a bit of a complicated investment thesis. One way to profit off of it is to do what Bernie Madoff claimed he was doing: sell a split-strike combo on Exelon. You sell a put spread, and use the proceeds to buy a call option. Usually, you pay a small net premium to do this. However, with volatility being so high (meaning that people pay more for puts), you could actually receive a small premium on this.  [more]

Recs

2

Western Union: Buy stock and/or sell puts

May 21, 2010 – Comments (1) | RELATED TICKERS: WU

Today, I sold Western Union put options, dated November 2010 with a strike price of $15, for $1.50 share (times 100 shares, in my case). This means that I received $150 premium up front, minus trading costs. I've effectively contracted to buy the shares at $13.50 if they fall below $15.  [more]

Recs

3

Market crashes - what I'm looking at buying

May 21, 2010 – Comments (0) | RELATED TICKERS: EXC , APOL

Crash may end up being too strong a word, but the market has certainly entered correction territory. I have a feeling that it will go lower still, but I'm not a technical analyst and that's just a guess.  [more]

Recs

2

Energy Transfer buying Regency: good for GP, not as good for LP

May 17, 2010 – Comments (2) | RELATED TICKERS: ETE , ETP

I've mentioned several times that there's a bit of a conflict of interest between the general partners of MLPs and the limited partners. GPs get incentive distribution rights, which are like fee breakpoints in mutual funds except that the fees are going up; in some partnerships like Kinder Morgan, the GP maxes out at 50% of all incremental cash flows. Also, every time the partnership issues new units, the GP benefits more than the LP (unless the units are overvalued).   [more]

Recs

2

Morningstar: 4 takes on the S&P's return prospects

May 01, 2010 – Comments (0)

 Morningstar recently had a video presentation on several takes on the S&P's return prospects. M*'s discounted cash flow models suggest that the S&P could return 8-10% annually over the next 10 years. On the other hand, they cite Jeremy Grantham, who predicts 3.9% annualized, John Hussman who predicts 5.7% and Robert Shiller, who predicts 6-7%.  [more]

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