FDX - $92.30 Federal Express ** No Stop **
** Exit with a touch of $90 **
Oil better dip quick or we will be out of this FDX play. It appeared support at $94 was going to hold but the oil spike on Friday broke that support. We still have the 200-day at $90 and that would be my signal to exit if we broke that level. Our insurance put is $3 in the money so we do not have any further exposure to risk. We can only gain from here but I would rather not profit from the puts if we don't have to.
Federal Express reported stronger than expected earnings on Thursday with net income up +53% and revenue up +21%. They hit a high near $102 in early March but returned to the bottom of their range at $96 after the earnings announcement. This was the entry we were waiting for.
FDX warned that higher oil prices could crimp earnings in the current quarter. Still according to FDX customer demand was so strong that it was driving new investment in aircraft, facilities and technology.
Comparing the FDX earnings with UPS it appears FDX is the clear winner and taking substantial market share away from UPS. On a broader note Yellow Roadway said on Friday that freight tonnage was at an all time high. They raised rates +4.5% and their fuel surcharge to 11%. FDX is the premium shipper in the sector and they are also having no problems with rates. According to UPS the fuel surcharge is turning into a profit center as the carriers learn how to hedge against oil prices. FDX already hedges but they also warned that rapid rises in crude could negate that hedge. You can bet that the fuel surcharges will continue to climb and earnings will remain at the top end of the spectrum.
Morgan Stanley said the FDX guidance to the top of the range was a positive sign and a couple cents of energy pressure was to be expected.
Target $96.00 for an entry on the next pullback.
2006 $100 LEAP Call WFX-AT @ $6.50
Entry $96.00 (03/17)
The SOX held 410 again and the SMH is holding at $32. We have plenty of time and a May insurance put so no change here. Uptrend support is $31 which equates to 400 on the SOX.
The current level is well above any attractive puts for insurance with a -2.50 move on the SMH a big move from this level. However real support could be found at $31 so I am going to recommend a 60 cent May put just in case. I believe we will know if this trade is going to be a winner very quickly.
2006 $35.00 LEAP Call YRH-AG @ $2.75
Entry $33 (03/15)
DGX finally broke out over the $101 resistance and it was a great ride. I raised the stop to $104 in order to capture the most profit if the gains fail. I am not comfortable with the market in general and don't want to give back our profits.
Quest announced a +21% increase in earnings in January and soared from $89.50 to just over $96 in a week. Instead of consolidating those gains it just keeps moving higher. We entered DGX on Jan-21st as it was moving lower and touched support at the 100-day average at $90. Three days later the rocket ride began from $89. The trick now is to stay far enough away from the price to keep from getting stopped but not give back all of our gains.
Quest Diagnostics Incorporated is the nation's leading provider of diagnostic testing, information and services, providing insights that enable healthcare professionals to make decisions that improve health. The company offers the broadest access to diagnostic testing services through its national network of laboratories and patient service centers, and provides interpretive consultation through its extensive medical and scientific staff.
Quest Diagnostics is also the leading provider of esoteric testing, including gene-based medical testing, and provides advanced information technology solutions to improve patient care. (Source DGX)
2006 $95 LEAP Call YFK-AS @ $6.40
Entry $91.00 (01/21)
ADBE - Adobe Systems $66.78 ** Stop $65.50 **
** Set a profit stop at $69.00 **
Adobe is holding its gains but I am still nervous. I kept the stop at $65.50 and I am hoping for a Nasdaq rebound off support to hit our profit target. I am maintaining a profit stop at $69.
Adobe is the king of the document and image business and continues to announce new products. The company announced earnings in December that rose +33% and beat estimates. Income for the year rose +69% on a +29% increase in revenue. Adobe affirmed guidance for 2005 and the stock has been beating the Nasdaq in percentage gains. In 2004 the stock rose +60%. Since they have already announced earnings we have very little event risk over the next month.
I recommended the February $55 put as insurance at 80 cents. That gave us six weeks for the Q1 earnings to cycle and for ADBE to pick a direction. If we are not profitable by Feb-18th expiration we will close and take our lumps.
Jan-06 $60 LEAP Call WAE-AL @ $7.50
Added new insurance on Feb-22nd
Stop loss $65.00
Entry $58.78 (01/09)
SYMC $21.77 Symantec - Veritas ** no stop **
SYMC finally dipped to support at $20 and a real rebound began. The April put is still in force but a rebound back over $22.50 will let it expire worthless. It will also add value to the Leap so I am not too worried about that potential. SYMC has resistance at 22.50 to it is time for a decision by SYMC buyers.
I believe that the SYMC/VRTS merger is a match made in heaven and analysts will come to that view as more plans are announced. The companies have no overlapping products but all their products are perfect fits for the others. With one company having anti-virus, data security, backup, recovery and storage management it puts the other stand-alone companies in a very difficult position. EMC and QLGC both fell in the storage sector and Mcafee was crushed in the anti-virus sector.
There is no stop on this position. With the 2007 LEAP Call any minor dips will not result in a material drop in the leap. The April $22.50 insurance put will protect us from any potential disaster. For me this is a buy and forget play until April expiration.
2007 $25 LEAP Call OBL-AE @ $6.30
Entry $25.37 (12/19)