Monthly Cash Machine Newsletter, Sunday, 02/06/2005 05:52:30 PM ET
HAVING TROUBLE PRINTING?
AZO - Autozone $95.95
Autozone (NYSE:AZO) is a specialty retailer of automotive parts and accessories, with most of its sales to do-it-yourself customers through retail outlets and on the Web at www.autozone.com. The company currently operates over 3,000 auto parts stores in the United States and approximately 60 stores in Mexico. Each of its stores carries a product line for cars, sport utility vehicles, vans and light trucks, including new and re-manufactured automotive hard parts, maintenance items, accessories and non-automotive products. Autozone also has a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers and service stations. In addition, the company markets the ALLDATA brand automotive diagnostic and repair software.
Shares of AZO climbed nearly 7% during the first week of February, finishing Friday's session at a new 52-week (closing) high of $95.95. The move came on the heels of a solid performance by retail shares and renewed buying pressure in industrial-related market groups. The recent technical indications suggest a new trading range for the issue with support near $90. However, the chart also reflects a tendency towards large, abrupt moves so any position in the issue will have to be protected with a loss-limiting order (preferably based on the stock, rather than the option). Traders who agree with a bullish outlook for the issue should consider the following (limited-risk) position. It will not be included in the monthly summary.
PLAY (less conservative - bullish/credit spread):
BUY PUT MAR-85.00 AZO-OQ OI=615 ASK=$0.35
SELL PUT MAR-90.00 AZO-OR OI=671 BID=$0.80
INITIAL "NET-CREDIT" TARGET = $0.55-$0.60
POTENTIAL PROFIT (X 5 contracts) = $275
RETURN ON INVESTMENT (max) = 12%
COST BASIS = $89.45
LOSS-LIMIT/EXIT POINT = $91.50 (cons) - $90.25 (aggr)