LVS - $116.77 Las Vegas Sands
The Sands was knocked for a $40 loss on an earnings miss that most analysts did not understand. The Sands reported a loss of 14 cents per share compared to analyst estimates for a 31 cent profit. The stock was crushed to $109 from its $149 level only a couple days earlier. The loss was blamed on high cost related to the opening of the Venetian Macao in August and a series of lucky runs by some high rollers. A Goldman Sachs analyst, Steven Kent, said very few casino openings go smoothly. The Macao was open only 34 days in the quarter and it is still not entirely completed and in full operation. According to Goldman these results are meaningless.
I am putting the Las Vegas Sands in as our first covered LEAP call. The option premiums are huge on LVS and while I wanted to buy a LEAP I could not justify the $20-30 price tags. Instead we will buy the stock ($117) and sell the $140 LEAP ($20). That makes our breakeven price $97. If we are called away as I expect in Jan-2009 our return will be about 36%. Not bad for a 12-month investment but it is even better (72%) if it is done on margin. Straight margin on the stock side is $60 not counting the income offset from the call premium. If the play goes as expected the cash outlay would be just under $6000 with the profit around $4300 per 100-share contract.
Las Vegas Sands Corp. (LVSC) owns and operates The Venetian Resort Hotel Casino (The Venetian) and The Sands Expo and Convention Center (The Sands Expo Center) in Las Vegas, Nevada, and The Sands Macao Casino (The Sands Macao) in Macao, China. The Company is also in the process of developing additional integrated resorts and properties in Las Vegas and Macao, including The Palazzo Resort Hotel Casino (The Palazzo), which will be adjacent to and connected with The Venetian, The Venetian Macao Resort Hotel Casino (The Venetian Macao) and other casino resort properties on the Cotai Strip in Macao. During the year ended December 31, 2006, the Company was awarded licenses to develop Marina Bay Sands, an integrated resort in Singapore, and Sands Bethworks in Bethlehem, Pennsylvania. It is also exploring other integrated resort opportunities in Asia, Europe and the United States.
Covered LEAP Call
Buy 100 Shares LVS currently $117
XOM - $88.05 Exxon Mobil
Exxon imploded on earnings to hit our entry trigger at $88 on Thursday. I am not going to repeat the earnings info here that I spelled out in the commentary above. I am happy with the position at the 100-day average and our worst-case risk should be to the 200-day average at about $83.
Exxon Mobil Corporation (ExxonMobil) is an international oil and gas company. ExxonMobil operates facilities or market products in many countries, and explores for oil and natural gas on six continents. ExxonMobil is involved in the exploration and production of crude oil and natural gas; the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a manufacturer and marketer of commodity and specialty petrochemicals, and also has interests in electric power generation facilities. In addition, the Company conducts research programs in support of these businesses.
Breakdown trigger: $88 Hit 11/01
Position: 2009 $100 LEAP Call ODU-AT @ $7.90
CAM - $98.60 Cameron International
CAM was hammered by earnings misses in the energy sector but responded by posting earnings of its own that rose +69% on a strong increase in demand for its drilling equipment. CAM earned $1.31 per share and analysts were only expecting $1.09. Were it not for misses by other companies CAM would have been off to the races. Instead we were lucky enough to get an entry very close to the low for the week. CAM said its orders received during the quarter rose +5.2% to $1.33 billion and backlog increased 22% to $4.13 billion.
Cameron International Corp., formerly Cooper Cameron Corporation, is an international manufacturer of oil and gas pressure control and separation equipment, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications and provides oil and gas separation, metering and flow measurement equipment. It is also a manufacturer of centrifugal air compressors, integral and separable gas compressors and turbochargers. The Company's operations are organized into three separate business segments: Drilling & Production Systems (DPS), formerly the Cameron segment; Valves & Measurement (V&M), formerly the Cooper Cameron Valves segment, and Compression Systems (CS), formerly the Cooper Compression segment. In January 2006, the Company acquired the assets and liabilities of Caldon Company.
Breakdown target: $95 Hit 10/30
Position: 2009 $100 LEAP Call OKA-AT @ $18