Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

DARK HORSE TRADERS’ HEDGE: Opportunity to turn $2 into $5 with Sweet (Fair) Child O' Mine

Wed, Apr 20, 7:15 PM ET, by Scott Brown, Sabrient.com

Opportunity to turn $2 into $5 with Sweet (Fair)Child O' Mine

by Scott Brown, President, Sabrient

She’s got eyes of the bluest skies
As if they thought of rain
I hate to look into those eyes
And see an ounce of pain

Her hair reminds me of a warm safe place
Where as a child I’d hide
And pray for the thunder
And the rain to quietly pass me by

Woah, oh, sweet child o’ mine – Gun's N Roses

Last week we had a bit of a "survival" episode where we decided which buy/writes to love tomorrow and which to say goodbye to. With that now behind us, we need to get exposure to a new long position to replace GME. Fairchild Semiconductor International (FCS) has everything we want in our long positions. Let's take a look under the hood of this "Sweet Child O' Mine".

Fairchild Semiconductor International Inc. (FCS) is focused on developing, manufacturing, and selling power analog, power discrete, and certain non-power semiconductor solutions to a range of end markets. Sabrient has a STRONGBUY on FCS largely due to its growth score of 93. The Value score of 59 is a bit lower than I usually like to find, but that is due to the consistent performance of the company which has driven the stock price higher.

I also like the Fundamental score of 74 compared to the average S&P 500 company being 49. The Fundamental score is a broad measure of the company's financial health, including its balance sheet, cash flow, revenue, and earnings quality. In other words, FCS is ranked high on a measure of how real and sustainable the earnings and cash flow are.

The last confirmation I like to check, prior to suggesting a position, is the Corporate Governance score. FCS has a very high score of 87 in this area, putting them in the top tier for conservative accounting measures. Sam Antar has been discussing conservative accounting measures on FOX News and on his website—specifically the accounting irregularities of Overstock.com, GMCR, and this week, the US Government.

Her (FCS) earnings growth and consistent performance above analysts' targets "remind me of a warm safe place," targeting $1.64 for 2011 and $1.82 for 2012. The 5 year expected growth rate of 12% gives FCS the "eyes of the bluest sky." We have seen positive earnings surprises in each of the last 4 quarters: June 2010 $.40 vs. $.31 expected, Sept 2010 $.42 vs. $.39, Dec 2010 $.45 vs. $.39 and Mar 2011 $.39 vs. $.36. The forward P/E is 10.43 in a sector that trades closer to 18. Eleven analysts have raised their expectations for 2011 earnings in the last 30 days, which we prefer, because it is a good sign of insider buying. Insiders and analysts who follow the company should know more about the prospects of the company than most others. Note: today CITI raised the price target on FCS from $22 to $26.

Despite this week's warning from the S&P concerning the long term outlook for US debt, we will "pray for the thunder, and the rain to quietly pass (us) by" and give exposure to FCS using a Bull/Call Spread. A Bull/Call Spread is accomplished by purchasing a call, in this case the Nov $14 call (FCS111119C00014000), and selling a higher call, in this case the Nov $19 call (FCS111119C00014000) for a net $3.50 purchase. We add a Nov $17 put (FCS111119P00017000) for $2.00 which makes the cost of our $5 spread $1.50. Worst case: we end up owning the FCS stock in November for $19.00 ($17 put price plus $3.50 bull/call spread cost minus $1.50 put premium). Best case: we invest $2 in the position, and if FCS is at or above $19 in November, we make 150% or $5.

Recommendation:

Bull/Call Spread on FCS

SELL(1 contract for each 100 shares) FCS Nov $14 call at the market, Thursday April 21, 2011

BUY(1 contract for each 100 shares owned) FCS Nov $19 put at the market, Thursday April 21, 2011 (approximately $3.50 net cost of bull/call spread)

Add

SELL(1 contract for each 100 shares) FCS Nov $17 put at the market, Thursday April 21, 2011

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.


SDI Glossary: "Call" Definition
SDI Glossary: "price" Definition
SDI Glossary: "Insiders" Definition
This Article's Word Cloud:   April   Bull   Call   Fairchild   International   Sabrient   Spread   Thursday   accounting   analysts   call   case   child   company   conservative   contract   cost   each   earnings   eyes   growth   including   into   last   like   long   market   other   pass   performance   position   power   pray   price   quietly   rain   rankings   score   selling   shares   should   spread   stock   that   their   this   warm   week   which   will

| More

Sector Detector: Santa tries to "sleigh" the fiscal cliff
Thu, Dec 13, 8:16 AM ET, by Sabrient.com

. ...

Dark Horse Traders' Hedge: It's Been a Long Way Down For Apple
Wed, Dec 12, 6:35 PM ET, by Sabrient.com

. ...

What the Market Wants: Historical Tax Rates Provide Clarity
Mon, Dec 10, 8:15 PM ET, by Sabrient.com

. ...

Sabrient and Gradient Release Earnings Quality Rank (EQR), a New Quantitative Tool
Mon, Dec 10, 11:16 AM ET, by Sabrient.com

. ...

Sector Detector: Tech shows best valuations as budget negotiation continues
Thu, Dec 6, 8:16 AM ET, by Sabrient.com

. ...

Scott Brown to Reveal Sabrient's Top Stocks on BNN
Wed, Dec 5, 2:15 PM ET, by Sabrient.com

. ...

What the Market Wants: Shame on Washington!
Mon, Dec 3, 6:46 PM ET, by Sabrient.com

. ...

ETF Periscope: Big Unemployment Numbers Across the Pond Remains the Big EU News
Mon, Dec 3, 1:46 PM ET, by Sabrient.com

. ...

Sector Detector: Rankings stay neutral while charts take a bullish turn
Thu, Nov 29, 8:16 AM ET, by Sabrient.com

. ...

What the Market Wants: From Rush to Risk to Worry
Mon, Nov 26, 6:35 PM ET, by Sabrient.com

. ...

ETF Periscope: Britain Adds More Drama to the EU Circus
Mon, Nov 26, 10:56 AM ET, by Sabrient.com

. ...

What the Market Wants: A $64 Trillion Dilemma
Mon, Nov 19, 6:16 PM ET, by Sabrient.com

. ...

ETF Periscope: A Short Week On Wall Street Might Be a Good Week to Go Short
Mon, Nov 19, 5:35 PM ET, by Sabrient.com

. ...

Sector Detector: Jaded public needs a new hero
Wed, Nov 14, 8:16 AM ET, by Sabrient.com

. ...

Sabrient's Equity Valuation and Ranking Now Available on Bloomberg's App Portal
Tue, Nov 13, 11:45 AM ET, by Sabrient.com

. ...

What the Market Wants: The Devil You Know
Mon, Nov 12, 7:35 PM ET, by Sabrient.com

. ...

Dark Horse Traders' Hedge: Ride out the Storm with FCX, Option Review
Mon, Nov 12, 7:16 PM ET, by Sabrient.com

. ...

ETF Periscope: Bad Economic Numbers Mean a Good Time to Short the Eurozone
Mon, Nov 12, 3:35 PM ET, by Sabrient.com

. ...

Sector Detector: Focus returns to corporate earnings and Europe
Thu, Nov 8, 8:16 AM ET, by Sabrient.com

. ...

What the Market Wants: After Tomorrow, Another Uncertainty Bites The Dust
Mon, Nov 5, 8:35 PM ET, by Sabrient.com

. ...

ETF Periscope: Elections the Flame, Wall Street the Moth
Mon, Nov 5, 1:36 PM ET, by Sabrient.com

. ...

Sector Detector: Stocks attempt to launch a pre-election rally
Fri, Nov 2, 8:16 AM ET, by Sabrient.com

. ...

What the Market Wants: Frankenstorm Scares the Markets Closed
Wed, Oct 31, 6:36 PM ET, by Sabrient.com

. ...

What the Market Wants: Frankenstorm!
Mon, Oct 29, 7:15 PM ET, by Sabrient.com

. ...

ETF Periscope: With Companies Sitting On Massive Cash, Expect Blisters On Bottom Lines
Mon, Oct 29, 12:55 PM ET, by Sabrient.com

. ...

Sector Detector: Stocks can't overcome weak quarterly reports
Thu, Oct 25, 8:16 AM ET, by Sabrient.com

. ...

What the Market Wants: Looking for Certainty Amidst Uncertainty
Mon, Oct 22, 7:25 PM ET, by Sabrient.com

. ...

ETF Periscope: Watch Out Below If Earnings Disappoint This Week
Mon, Oct 22, 2:36 PM ET, by Sabrient.com

. ...

Sector Detector: Stocks back in rally mode even without Tech leadership
Thu, Oct 18, 8:15 AM ET, by Sabrient.com

. ...

What the Market Wants: Uncertainty Reigns in the Market
Mon, Oct 15, 6:53 PM ET, by Sabrient.com

. ...

ETF Periscope: Eurozone and Earnings Duke It Out for This Week's Market Mover Title
Mon, Oct 15, 11:16 AM ET, by Sabrient.com

. ...

Sector Detector: Earnings season launches under cloud of low expectations
Thu, Oct 11, 8:16 AM ET, by Sabrient.com

. ...

Jobs, Food Stamps, Conspiracies (Market Shadows' Fun With Numbers)
Tue, Oct 9, 4:56 PM ET, by Sabrient.com

. ...

Glimpse into the Future (Market Shadows' Fun With Numbers)
Tue, Oct 9, 4:45 PM ET, by Sabrient.com

. ...

What the Market Wants: Fasten Your Money Belts
Mon, Oct 8, 8:16 PM ET, by Sabrient.com

. ...

Ride Sally Ride (SLM) in Option Review, Add Cooper Tire (CTB)
Mon, Oct 8, 7:45 PM ET, by Sabrient.com

. ...

ETF Periscope: Ladies and Gentlemen, Start Your Earnings Season
Mon, Oct 8, 10:56 AM ET, by Sabrient.com

. ...

Sector Detector: Bulls keep their powder dry as presidential debates begin
Thu, Oct 4, 8:16 AM ET, by Sabrient.com

. ...

What the Market Wants: Fly to Safety (and not on American Airlines)
Mon, Oct 1, 7:16 PM ET, by Sabrient.com

. ...

Options Trade on GBX and MIPS
Mon, Oct 1, 12:36 PM ET, by Sabrient.com

. ...

ETF Periscope: Spain Remains a Pain For Wall Street
Mon, Oct 1, 11:15 AM ET, by Sabrient.com

. ...

5 Stocks Billionaires Are Crazy About
Fri, Sep 28, 12:35 PM ET, by Sabrient.com

. ...

Sector Detector: Investors Watch Romney's Hunt for Red October
Thu, Sep 27, 8:15 AM ET, by Sabrient.com

. ...

Broken Mirrors
Tue, Sep 25, 9:45 PM ET, by Sabrient.com

. ...

What the Market Wants: Caution is the Word of the Week
Mon, Sep 24, 7:25 PM ET, by Sabrient.com

. ...

David Brown Quoted in MarketWatch Article
Mon, Sep 24, 1:16 PM ET, by Sabrient.com

. ...

ETF Periscope: Is Wall Street Floating Along On An Equity Bubble?
Mon, Sep 24, 11:16 AM ET, by Sabrient.com

. ...

Sector Detector: Stocks finally break out from 3-month rising channel
Thu, Sep 20, 8:15 AM ET, by Sabrient.com

. ...

What the Market Wants: QE3 can Likely Produce 10% Short-term Gain
Mon, Sep 17, 5:55 PM ET, by Sabrient.com

. ...

ETF Periscope: Bernanke's Open End Bond Purchases May Snag at the Fiscal Cliff
Mon, Sep 17, 11:15 AM ET, by Sabrient.com

. ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

DARK HORSE TRADERS’ HEDGE: Opportunity to turn $2 into $5 with Sweet (Fair) Child O' Mine | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.