FTI - $68.19 - FMC Technologies
FTI continued its run with a +4 gain for the week. The June insurance put is now out of range and will hopefully expire worthless with FTI well over $70. Citigroup upgraded FTI from hold to buy with a price target of $78 back on May 22nd and the stock has been going up ever since. The historic high is just under $72 hit back on May 10th.
Profit stop: Exit put only on a touch of $56.50
FMC Technologies, Inc. provides mission-critical solutions for the energy, food processing and air transportation industries. The Company designs, manufactures and services machinery and systems for its customers through four business segments: Energy Production Systems, Energy Processing Systems, FoodTech and Airport Systems. Energy Production Systems segment designs and manufactures systems, and provides services used by oil and gas companies involved in land and offshore, including deepwater, exploration and production of crude oil and gas. Energy Processing Systems segment designs, manufactures and supplies high-pressure valves and fittings for oilfield service customers. FoodTech segment designs, manufactures and services food processing and handling systems to the food industry. Airport Systems segment is a global supplier of passenger boarding bridges, cargo loaders, and other ground support products and services.
Earnings update on May 9th
Breakout trigger $63.50 Hit 5/23
Entry $63.50 (5/23)
TIE - $39.96 - Titanium Metals
TIE rose to break resistance at 38.50 and could now be getting ready to accelerate after three weeks in the dumps. The historic high is $47.62 set back on May 10th. I would love to see TIE break that record. TIE was upgraded on Thursday to buy from neutral by FTN Midwest.
TIE has split 2:1 THREE times in the last 12 months. TIE is 51% owned by insiders which reduces the float and makes us a partner in the business rather than just a shareholder. Anybody with a 51% ownership is going to be doing everything they can to make their stock grow and we get to benefit. The company announced plans to increase production by +50% at the stockholder meeting last week.
Titanium Metals Corporation (TIMET) is a producer of titanium sponge, melted products and a variety of mill products for aerospace, industrial and other applications. For the commercial aerospace industry, the Company supplies titanium products to manufacturers of commercial airframes. Outside of aerospace markets, the Company manufactures a range of products for customers in the chemical process, oil and gas, consumer, sporting goods, automotive, power generation and armor/armament industries. Approximately 15% of the Company's sales revenue, during the year ended December 31, 2005, was generated by sales into industrial and emerging markets. TIMET markets and sells its products in the United States, the United Kingdom, France and Italy.
Buy December $45 Call TIE-LI currently $5.70 (no LEAPS)
Entry $38.22 (5/28)
BHP - $42.65 - BHP Billiton Limited ** No Stop **
BHP has not completely recovered from the May commodity dump. With copper limit down last Wednesday I am surprised we did not get a bigger drop in BHP.
The June $40 insurance put may still come back into play. If we do get a substantial decline I would target $37.50 to close the put for a profit. With only two weeks remaining I am doubtful we will get that opportunity but we do need to be ready.
BHP Billiton Limited is a diversified resources group. The Company is an exporter of metallurgical coal for the steel industry; an exporter of energy coal; a producer of iron ore, copper, nickel metal, manganese ore, primary aluminium and manganese and chrome ferroalloys. It also has substantial interests in oil, gas, liquefied natural gas (LNG), diamonds, silver and titanium minerals. BHP Billiton operates in seven segments: Petroleum (oil, natural gas and LNG), Aluminium (aluminium and alumina), Base Metals (copper, silver, zinc and lead), Carbon Steel Materials (metallurgical coal, iron ore and manganese), Diamonds and Specialty Products (diamonds, titanium minerals and metals distribution), Energy Coal (energy coal) and Stainless Steel Materials (nickel metal, and chrome and nickel ferroalloys).
Breakdown trigger $46.75 hit 5/15
Entry $46.75 (5/15)
MDR - $46.11 - McDermott ** No Stop **
McDermott split 3:2 on June 1st giving us 150 shares per contract rather than 100. This might be a good spot to add to the MDR position with a long term outlook.
J. Ray McDermott is a leading provider of engineering, procurement, construction, and installation services for offshore oil and gas field developments worldwide. McDermott International, Inc. is a leading worldwide energy services company. McDermott's subsidiaries provide engineering, construction, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy.
3:2 split on June 1st reduced the strike price by 1/3 and increased the contract size to 150 shares.
Position 2007 $70 LEAP Call OYZ-AN @ $8.50
Entry $44.02 (5/18)
TRN - $58.44 - Trinity Industries ** No Stop **
Trinity announced the price for its convertible debt offering for $450 million. The notes can be converted to stock at $78.34 per share and pay 3.875% interest until converted. While this is a long term positive for its business it is short term negative in the eyes of investors as it will eventually dilute the outstanding shares. TRN dropped -$4 on the news.
The June $60 insurance put is now in the money and worth $2.50 compared to our cost of $1.00. I considered closing the put but there was no attempt to rally in TRN on Friday. Instead of an outright close I am going to put a stop loss on the put and a profit stop.
Stop loss: Exit put if TRN trades at $58.75
Trinity Industries, Inc. is a diversified industrial company that provides a variety of products and services for the transportation, industrial, construction and energy sectors. The Company is engaged in the manufacturing and marketing of railcars, inland barges, concrete and aggregates, highway products, beams and girders used in highway construction, weld pipe fittings, tank containers and structural wind towers. In addition, it leases railcars to customers through a captive leasing business, Trinity Industries Leasing Company. Trinity has five business groups: Rail Group, Railcar Leasing and Management Services Group, Construction Products Group, Inland Barge Group and the Energy Equipment Group.
PTR - $107.38 - Petrochina ** No Stop **
PTR completed another tough week and no signs of a rebound have appeared. I still believe this is related to the global margin call and once a rebound arrives it will be strong.
The plan for the week was to exit the insurance put with a continued rise in order to save some of the expensive premium. The gap open on Tuesday took us out of the put at #2.70 but the decline below $107 later that day put us back into the position at $2.65. With the decline still intact I am going to target $103 as a put exit as well as $110. Time is growing short on the June options.
Close the insurance put, June $105 PUT PTR-RA if PTR trades over $110.
Close the insurance put, June $105 Put PTR-RA if PTR trades at $103.
Petrochina is the fourth largest energy company in the world. It is a government monopoly but it acts like an independent. PTR is aggressively acquiring leases and rapidly expanding its drilling program. It currently has over 10.9 billion bbls of proven reserves and more than 44 TCF of gas. Warren Buffet owns $2.3 billion of PTR stock. It trades at less than $12 per BOE and has a 3.5% dividend yield. PTR owns 14,000 service stations and has 2,900 franchised stations. It is majority owned by China and has unlimited capital for expansion if China likes the deal. I expect several acquisitions by PTR over the next couple years but with a $208 billion market cap and China as the owner it will not be a target itself. China would never give up control of those oil assets. PTR saw its output rise +6.3% in Q1 to 267.7 million bbls when most companies were posting declines in reserves and production. Gas output rose +35.6%. PTR owns 75% of the oil and gas reserves in China and supplies 40% of its needs. This is as close to a permanent lock on a profit as we can get given the rapid growth of China's economy.
Cramer was pounding the table on PTR on Friday saying it was not afraid to drill in communist countries, places torn apart by strife or run by two-bit dictators like Chavez or Morales. With the Chinese government and military behind it there is little chance of somebody trying to confiscate PTR assets.
PetroChina Company Limited operates a range of petroleum and related activities through four primary business segments: Exploration and Production Segment, Refining and Marketing Segment, Chemicals and Marketing Segment, and Natural Gas and Pipeline Segment. The activities include the exploration, development, production and sales of crude oil and natural gas; the refining, transportation, storage and marketing of crude oil and petroleum products; the production and sales of basic petrochemical products, derivative chemical products and other chemical products, and the transmission of natural gas, crude oil and refined products, and the sales of natural gas.
I am using the $120 LEAP instead of the higher strikes because the dip reduced the price to a manageable level. The choice is $120 or $130 and there is only a $3.60 difference in price. Amortized over the next 18 months that is nothing. I only wanted round number strikes in case there is a stock split.
Position: 2008 $120 LEAP Call LJC-AD @ $16.20
Position: June $105 PUT PTR-RA, @ $4.20 (5/22)
Entry 5/14 $116.20
GG $30.34 - Goldcorp ** No Stop **
Goldcorp continues to hold above the 100-day average while we wait for gold bugs to return. I believe the selling in gold is nearly over and the dollar is going to decline further over the next two weeks. This will raise the price of gold. We have a July insurance put so we have plenty of time to wait.
Goldcorp Inc. (Goldcorp) is a North American-based gold producer engaged in exploration, extraction and processing of gold. The Company's primary asset is its Red Lake Mine, a gold mine in Canada. It's other operations include the Bajo de la Alumbrera gold-copper mine (the Alumbrera Mine) in Argentina; a 100% interest in each of the San Dimas gold-silver mine (the San Dimas Mine); the San Martin gold-silver mine (the San Martin Mine); the Nukay gold-silver mine (the Nukay Mine) in Mexico, and a 100% interest in the Peak gold mine (the Peak Mine) in Australia. Goldcorp also has 100% interests in the Los Filos gold development stage project (the Los Filos Project) in Mexico and the Amapari gold project (the Amapari Project) in Brazil. Goldcorp also owns approximately 59% of Silver Wheaton Corp. (Silver Wheaton), a mining company with 100% of its revenue from silver production.
Breakout trigger $36.00 hit on 5/01
Entry $36.00 (5/01)
FTO - $57.10 - Frontier Oil Corp
FTO has rebounded out of the May dip and appears ready to break resistance at $58. This is refinery season and they should come back into favor as summer progresses.
Stock split: 2:1 scheduled for June 26th
FTO is a strong takeover candidate and should be very profitable since they can refine the cheaper heavy crude.
Earnings: May 8th. FTO beat the street by +20 cents at $1.02
Frontier Oil Corporation (Frontier) is an independent energy company engaged in crude oil refining and wholesale marketing of refined petroleum products. The Company operates refineries (the Refineries) located in Cheyenne, Wyoming, and El Dorado, Kansas, with a total annual average crude oil capacity of 162,000 barrels per day (bpd). Both of the Refineries are complex refineries, capable of processing heavier, less expensive types of crude oil, while producing gasoline, diesel fuel and other high-margin refined products. Frontier purchases crude oil to be refined and markets refined petroleum products, including various grades of gasoline, diesel, jet fuel, asphalt and other by-products. The Company focuses its marketing efforts in the Rocky Mountain region, which includes the states of Colorado, Wyoming, Montana and Utah, and in the Plains States region, which includes the states of Kansas, Oklahoma, Nebraska, Iowa, Missouri, North Dakota and South Dakota.
Position: Oct $60 Call FTO-JL @ $6.50
Cost reduction play April 18th
CSX - $68.58 - CSX Corp ** No Stop **
CSX appears to be gaining momentum and a moving train is hard to stop. Resistance at $68.50 could be the last pause before a new high.
CSX is by far the best of the railroads and a rebounding Transport index should give CSX wings. We have a 2008 LEAP so I am not really worried about the dip.
Earnings: April 18th $1.06 vs estimates of 89 cents
CSX Corporation (CSX) based in Jacksonville, Florida, owns companies providing rail, intermodal and rail-to-truck transload services that combine to form transportation companies, connecting more than 70 ocean, river and lake ports. CSX's principal operating company, CSX Transportation Inc. (CSXT), operates the railroad in the eastern United States with approximately 21,000-mile rail network linking commercial markets in 23 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec. CSX Intermodal Inc. (Intermodal) is a coast-to-coast intermodal transportation provider, an integrated intermodal company serving customers from origin to destination with its own truck and terminal operations, plus a dedicated domestic container fleet. Containers and trailers are loaded and unloaded from trains, with trucks providing the link between intermodal terminals and the customer.
Entry $60.50 (4/03)
BTU - $64.91 - Peabody Energy ** No Stop **
BTU finally produced a credible rally and $65.75 could be the last hurdle before a sprint to a new high. Hotter weather will pushup gas prices and coal sentiment will follow.
Earnings: April 18th, +151% jump on +21% revenue gain.
Peabody Energy Corporation (Peabody) is the largest private-sector coal company in the world. During the year ended December 31, 2004, the Company sold 227.2 million tons of coal. It sells coal to over 300 electricity generating and industrial plants in 16 countries. The Company owns, through its subsidiaries, majority interests in 32 coal operations located throughout all the United States coal producing regions and in Australia. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois, Indiana, Kentucky and West Virginia. The Company owns four mines in Queensland, Australia. Most of the Australian production is low-sulfur, metallurgical coal. In addition to the mining operations, the Company markets, brokers and trades coal.
Position: 2008 $55 LEAP Call LLW-AK @ $9.50
April 8th covered call:
April 24th covered call:
Entry $48.00 (3/07)
XLE - $56.48 - Energy Select SPDR ** No Stop **
The XLE has broken out of its correction congestion below $56 and could be headed for a retest of the highs at $60. No change in the play.
The Energy Select Sector SPDR Fund (the Fund) is an index fund that seeks to replicate the total return of the Energy Select Sector Index of the Standard & Poor's 500 Composite Stock Index (S&P 500 Index). During the fiscal year ended September 30, 2004 (fiscal 2004), the Fund had a return of 48.27%, as compared to the Energy Select Sector Index return of 48.91% and the S&P 500 Index return of 13.87%. The Fund invests in industries, such as energy equipment and services, and oil and gas services, among others. In fiscal 2004, its top five holdings were Exxon Mobil Corp., ChevronTexaco Corp., ConocoPhillips Inc., Schlumberger Ltd. and Occidental Petroleum Corp.
Breakdown of components of the XLE:
Position: 2007 $55 LEAP Call OJW-AC @ $4.10
Entry $52.00 (3/07)
CCJ - $43.51 - Cameco ** No stop **
Cameco continues to be a strong performer and is closing in on a new high less than $2 above. After several weeks of sideways consolidation the bullish trend has returned.
Earnings: April 30th. 32 cents vs .07 cents in prior qtr.
Original Play Description:
We were triggered on the breakout at $72.50 on Monday and again on the $67 breakdown target on Wednesday. Each trigger was for a 1/2 position giving us a full position with an average cost of $9.80 each. That turned out to be the closing price on Friday so if you missed either opportunity you did not miss anything. We are going to add another full position after CCJ splits on Feb-23rd.
This is my best single play in the list. Cameco just announced record earnings and raised their forecast for 2006 and beyond. They projected a +40% rise in revenue and a rise in margin from 23% to 28% for 2006. At the same time they announced a 2:1 split for Feb-23rd on the NYSE. They also raised the dividend to 32 cents from 24 cents payable on April 13th.
They also announced they were buying Zircatec for $108 million. Zircatec is a maker of nuclear fuel bundles for Canadian designed heavy water reactors. They said the acquisition would moderately boost 2006 earnings assuming no material changes in operations.
The combination of events including the purchase of Zircatec caused the stock to plunge from its all time high of $82.15 on Feb-1st to close at $69.97 on Friday Feb-3rd. That level remained support for the entire week through Feb-10th.
Cameco Corporation is engaged in exploring, developing, mining and milling uranium ore to produce uranium concentrates. The Company is also a commercial converter of uranium concentrates (U3O8) to UF6 (uranium hexafluoride), as well as a supplier of services to convert uranium concentrates to UO2 (uranium dioxide). Cameco, through its subsidiaries, has a 31.6% limited partnership interest in Bruce Power Limited Partnership, which operates six nuclear reactors in Ontario, Canada. Cameco also owns 53% of Centerra Gold Inc. (TSX: CG), a growth-oriented gold mining and exploration company engaged in the acquisition, exploration, development and operation of gold properties in Central Asia, the former Soviet Union and other emerging markets.
Breakdown target $67.00 hit
Pre-split average cost: $9.80
Additional Position: 2008 $40 LEAP LTA-AH @ $9.00 on 2/25.
HAL - $76.75 - Halliburton ** No Stop **
HAL has broken out of resistance at $76 and strength appears to be returning to the stock. $82 is the next resistance level as we near a new high. The split on June 23rd should attract some new attention. HAL and SLB should continue to prosper as long as oil stays over $50. That gives us a lot of room to wander and HAL has shown that volatility over the last year.
2:1 split scheduled for June 23rd.
PAR on HAL is $100 after the spin off.
Earnings: April 21st, 91 cents
Halliburton is planning on spinning off KBR, its construction and engineering unit. This should produce a significant bounce in HAL stock. (KBR stands for Kellogg, Brown and Root) HAL is a very strong service company and should soar when it is no longer held in check by the sins of KBR.
2:1 Split scheduled for June 23rd.
Halliburton Company is an oilfield services company, and a provider of engineering and construction services. The Company provides services, products, maintenance, engineering and construction to energy, industrial and governmental customers. Its six business segments are Production Optimization, Fluid Systems, Drilling and Formation Evaluation, Digital and Consulting Solutions, collectively the Energy Services Group, and Government and Infrastructure, and Energy and Chemicals, collectively known as KBR. In August 2004, the Company sold its surface well testing and sub-sea test tree operations to Power Well Service Holdings, LLC. In January 2005, the Company emerged out of the chapter 11 proceedings and can operate the businesses without Bankruptcy Court supervision.
Current position: 2007 $80 LEAP Call VHW-AP @ 11.25
Original Position: 2007 $85 LEAP Call VHW-AQ @ $9.80
Our adjusted cost in the 2007 $80 LEAPS is now $11.25
VLO - $63.06 Valero ** No Stop **
VLO broke over initial resistance at $62 and appears ready to rumble. The refinery outage and the loss of -50,000 bbls of gasoline per day and -20,000 bbls of distillate knocked VLO back on Wednesday but it recovered quickly.
Earnings: April 25th, +60%
Valero Energy Corporation (Valero) owns and operates 18 refineries having a combined throughput capacity, including crude oil and other feedstocks, of approximately 3.3 million barrels per day. Valero produces environmentally clean refined products, such as reformulated gasoline (RFG), gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen). It also produces conventional gasoline, distillates, jet fuel, asphalt and petrochemicals. Valero markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It sells refined products through a network of more than 4,700 retail and wholesale branded outlets in the United States, Canada and Aruba. Valero's retail operations include approximately 1,500 company-operated sites that sell transportation fuels and convenience store merchandise.
Position: 2007 $60 LEAP Call VHB-AL @ $6.60
Entry $52.30 (12/16)