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Play Updates

In Play Updates and Reviews

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The current format of the Play Updates has changed. Only the pertinent data that has changed from the prior week will be shown in an effort to concentrate more on new commentary on new plays rather than restating existing positions. Each play has a link back to either its last full commentary or its initial description.

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TS - $47.15 -0.72 - Tenaris

No news and I believe we are seeing the calm before the storm ahead of earnings. Earnings are next Tuesday. TS did lose some ground on a decline in ADRs as the week ended.

To see the initial commentary on this position click here

Earnings schedule: May 4th

No LEAPS

Position: Sept $50 Call TSW-IJ @ $3.80 Stop TS @ $45.50

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BHP - $48.92 -1.52 - BHP Billiton

A dip in gold and copper caused the miners to weaken. No news and no change in play. No earnings date announced.

To see the initial commentary on this position click here

Earnings schedule: No date announced.

Breakout target $43.50 hit March 12th

Position: JAN-09 $50 LEAP Call ZPK-AJ @ $6.00

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CCJ - $46.25 -.46 - Cameco

Cameco reported earnings on Friday after the close that were -47% below the earnings for the comparison quarter. Factors impacting earnings were timing of deliveries, a planned electrical outage and lower gold production. Delivery schedules are dependent on customer requirements. Most request delivery in Q4 but in 2005 there was a significant number of deliveries pushed from Q4 into Q1. This produced a significant revenue timing imbalance in Q1-06 and that carried over into Q1-07. CCJ did raise guidance substantially saying 2007 revenues should climb by as much as 50% overall and as much as 90% in uranium. CCJ said it had new market price contracts for four million pounds to be delivered in 2007. The price received will be significantly higher than existing legacy contracts. No change in play.

There has not been a weekly drop in uranium prices since 2003. The NYMEX announced it would begin trading a uranium commodity contract on May 7th. The contract would cover 250 pounds of uranium.

Worldwide there are 28 new reactors being built, 64 on the drawing boards and 158 in the proposal stages. If all were built it would be a 57% increase from the 435 reactors now in operation. In 2006 the world consumed 180 million pounds of uranium but produced only 100 million pounds. The rest came from Russian nuclear warheads being decommissioned. The supply from those warheads is dwindling and will be completely gone by 2015.

To see the initial commentary on this position click here

Breakout trigger: $37.50 Hit March 7th

Position: JAN-09 $40 LEAP Call ZBK-AH @ $7.80

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PTR - $114.98 -1.72 - Petrochina

No news on PetroChina and no excitement. Support is holding but so is resistance. We know PTR can be explosive once a move starts so be patient. No change in play.

To see the initial commentary on this position click here

Breakdown target:
$110 1/2 position - hit Mar-5th

Position: JAN-09 $120 LEAP Call ZJK-AD @ $10.70
Cost reduction 4/19 $10.70 -2.25 = $8.45

Cost reduction play:
Position: stopped @ $114 4/19
Short June $105 Put PTR-RA @ $3.40, exit $1.15. +2.25

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SNP - $89.26 -0.14 - Sinopec

Sinopec paused after nine workers died in a terror attack in Ethiopia. A 37 member exploration team guarded by over 100 soldiers was attacked near the Somali border by more than 200 heavily armed Somali rebels. Sinopec said it would not stop its expansion plans for Africa. No change in play.

To see the initial commentary on this position click here

Breakdown target $82.50 hit on 2/27

Position: OCT $85 Call SNP-JQ @ $7.00

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CHK $33.67 +0.86 - Chesapeake Energy ** Stop loss $30.50 **

The CHK CEO Aubrey McClendon said in an interview last week that it was planning on organic growth over the next several years. CHK has invested billions for leases over the last seven years and in his words "Now it's time to go out and see what's under them." McClendon said he expected production growth in 2007 from 14-18% and another 10-14% in 2008. McClendon said he was modestly bullish on gas prices in 2007. Since he has spent several hundred million personally to buy CHK stock over the last two years and now owns about 11% of the company I would tend to believe his outlook. No change in play.

Insurance put:
Buy Oct $30 Put CHK-VF currently 90 cents. Profit stop $28.

To see the initial commentary on this position click here

Earnings schedule: May 4th

Current recommendation: Hold

Position: 2009 $35 LEAP VEC-AG @ $5.30

Insurance put: none

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MRO $102.80 +2.25 - Marathon Oil

MRO announced a 2:1 stock split on Wednesday to occur on June 18th to holders of record as of May 23rd. The split will be distributed as a dividend. They also raised their cash dividend by 20% to 48 cents. MRO also announced a new deepwater discovery in Angola that tested at nearly 4,000 bpd. Earnings are Tuesday. No change in play.

To see the initial commentary on this position click here

Earnings schedule: May 1st

Current recommendation: Buy at $85

Position 2009 $100 LEAP Call VXM-AT @ $12.60
Cost update: Expired March put +65 cents to $13.25

Insurance put: 2/18/07
Position: March $85 PUT MRO-OQ @ 65 cents. expired

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HES - $57.02 -0.54 - Hess Corporation
(Formerly (AHC))

Hess announced earnings that fell to $1.17 per share from $2.22 in the comparison quarter. Gas prices received fell to $5 mcf from $6.73 in 2006. Hess blamed the drop in prices as the major reason for the earnings slide. Hess received an average of $2.56 per barrel less in Q1-07 than Q1-06. Production rose to 382,000 bpd from 361,000 bpd in the same period. Profits in the refinery business nearly doubled to $101 million but profits in the exploration division fell nearly half to $340 million compared to $706 million. The cost of wells and timing of production starts will always cause volatility in this division. No change in play.

Insurance put:
Buy May $55 Put IGG-QK currently 80 cents. Profit Target $51

To see the initial commentary on this position click here

Earnings schedule: $1.17 vs $2.22

Current recommendation: Buy at $47

Position:
11/05/06 2009 $50 LEAP Call VHS-AJ @ $6.80
Cost adjustment put exit +1.60, cost = $8.40

Insurance Put: Triggered Jan-3rd @ $49
01/03/07 May $45 put HES-QI @ $2.60, exit 1/26 $1.00

Insurance Put: 2/26/07
MAY $50 PUT IGG-QJ @ $1.35, profit stop $46

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BTU - $48.92 +2.37 - Peabody Energy

BTU rebounded back to resistance at $50 after Arch Coal beat earnings estimates and raised full year guidance. The rising cost of uranium and the projected scarcity a decade from now has many planners taking another hard look at coal. According to CEO Gregory Boyce the demand for electrical generation is rising strongly. A move over $50 could start a new uptrend and attract new money to BTU. No change in play.

To see the initial commentary on this position click here

Earnings schedule: April 19th, -32% on special items

Current recommendation: Buy at $37.50

Position:
10/22/06 Jan-2009 $50 LEAP Call ZZT-AJ @ $8.70
02/05/07 March put stopped -$1.00, cost = $9.70

Insurance put: Triggered with drop through $39
01/03/07 March $35 Put BTU-OG at $1.15, stopped @ $42.50

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SLB $75.64 +0.41 Schlumberger

A week after SLB earnings the Oil Service Index hit a new historic high. The service business and the drillers are riding a wave of bullish sentiment about the increase in drilling activity worldwide. No change in play.

To see the last full commentary on this position click here

Earnings schedule: April 20th, 96 cents vs est of 91 cents

Current recommendation: Buy at $60, stop at $55

LEAP Position:
1/2 9/11/06 @ $8.60
1/2 9/12/06 @ $8.00
Position: 2009 $70 LEAP Call VWY-AN @ $8.30
Cost update for expired Jan put +2.00 = $10.30

Insurance Put: 9/18
Position: Jan $50 Put SLB-MJ @ $2.00, expired

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SUN $76.79 +4.40 - Sunoco

SUN rebounded strongly for the week to a new eight-month high and the strength of the refining sector. No news but a nice trend could turn into a breakout over $80.

To see the last full commentary on this position click here

Earnings schedule: May 3rd

Earnings: Jan-31st, -57% $1.00 vs $.96 analyst est.

Current recommendation: Buy at $60, stop at $54

LEAP Position:
9/12/06 Position: 2009 $70 LEAP Call VUN-AN @ $13.50
Cost update expired Jan put +2.40 = $15.90

Insurance Put:
Position: Jan $55 Put SUN-MK @ $2.40, expired

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VLO $71.21 +5.28 - Valero Energy

Valero blasted to a new historic high and a very nice week after reporting a +30% increase in earnings for the quarter. Profits rose from $1.32 to $1.86 per share and that even beat the optimistic analyst estimates of $1.81. VLO also tripled its stock buyback to $6 billion in 2007 compared to $2 billion in 2006. No change in play.

To see the last full commentary on this position click here

Earnings: April 24th $1.86 vs $1.32

Current recommendation: Buy at $50, stop at $45

LEAP Position:
9/24/06 Position: 2009 $60 LEAP Call VHB-AL @ $7.70
Cost update expired Jan put +2.25 = $9.95

Insurance Put:
Position: 9/25 Jan $45 Put VLO-MI @ $2.25, expired

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DO - $87.94 +5.75 - Diamond Offshore ** Stop $73.00 **

DO broke resistance at $85 on strong earnings and hit a new nine-month high. DO profits soared +54% as day rates continued to rise. Earnings rose to $1.64 vs $1.06 in the comparison quarter. Day rates for its largest floaters rose from $189,000 to $280,000 per day. Rig usage for floaters was holding at 98%. No news and no change in play.

To see the last full commentary on this position click here

Earnings schedule: $1.64 vs $1.06

Current recommendation: Buy at $75, stop at $69

LEAP Position:
8/29/06 Position: 2009 $80 LEAP Call VCT-AP @ 14.20
Cost reduction: Oct $70 Put profit -3.15, cost now $11.05
Cost increase: Dec $60 put expired -2.40, cost now $13.45

Insurance Put:
10/08 Dec $60 Put DO-XL @ $2.40, expired

Position closed:
10/03 October $70 put DO-VN @ $1.65, exit @ $4.80, +3.15

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Non-Energy Positions
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TOL - $30.20 +$1.01 - Toll Brothers

Toll continued to move higher and comments from CEO Robert Toll helped to calm the housing market last week. Toll said everyone should hang onto their existing homes because prices could be significantly higher, 25% or more, 3-5 years from now. The reason he gave was the lack of new homes scheduled to be built. The majority of homebuilders have walked on all their land options and will have to renegotiate any new property when the housing cycle returns. Toll said it takes as much as three years to buy land, perform the tract layouts, get approvals from local governments and add in the utilities necessary before building begins. During this time home inventories will fall and prices could rise sharply as demand increases. Earnings are May 8th and we will get another chance to see if his outlook is better than the rest of the sector.

To see the initial commentary on this position click here

Earnings schedule: May 8th

Breakout target: $28.50 hit 4/16
Position: 2009 $35 LEAP OTY-AG @ $3.50

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BZH - $34.84 +1.40 - Beazer Homes ** LEAP PUT **

Beazer CEO Ian McCarthy warned on Thursday that "We have yet ro see any meaningful evidence of a sustainable recovery and we expect current conditions to continue." Beazer also warned that given "the low visibility as to when conditions may improve" it is withdrawing its 2007 guidance. Back in January the company expected full year results in the $1.25 to $1.50 range. Beazer reported a loss for Q1 of $1.12 per share, down significantly from the $2.31 profit it reported for the same period in 2006.

FBI spokesman, Ken Lucas said, "There is all sorts of potential fraud issues here. We are looking at all types of fraud associated with Beazer corporate, mortgage and investments." Beazer said it had launched an independent audit of its mortgage origination business to coincide with the FBI investigation.

I can't conceive of why people are buying this stock given the investigations from nearly every enforcement branch of the government. I am sticking with it on the hopes reason returns to these investors.

Beazer is being flooded with suits, some seeking class action status on charges it practiced predatory lending, filed illegal loan documents and manipulated its stock price. These types of suits appear whenever bad news appears about a company but in this case it looks grim.

To see the last full commentary on this position click here

Earnings: April 26th

Position: Jan-08 $25 PUT WZF-ME @ $3.10

No stop loss
 

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