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Lunch @ the Market: Freeport, BofA, Banco Marco - 4262 views
Dang, it feels good to be a gangsta.
OK, so we’re not exactly gangsta over here at MOFinancial -- but we have had people call us "Mo' Money Mo' Money Financial" instead of "M O Financial."
It is certainly nice to be here on OpEx Friday. We don’t have a single portfolio position that we have concerns about. Short put spreads in Freeport (FCX), Salesforce.com (CRM), Cree (CREE), JPMorgan Chase (JPM), Western Digital (WDC), Netflix (NFLX) and Baidu (BIDU) and even outright short puts in Chesapeake (CHK) will all expire worthless.
We’ll also have some calls that we’re short expire worthless as well. We will comb through the book to see if we want anything called away. We are still going to err on the side of being called away and raising cash on nearly every holding unless it’s oil, minerals or mining, which we want to hold only if inflation hedges and rising prices thanks to supply constraints on metals like gold, copper and iron ore.
The trade for December may be Freeport-McMoRan. Every time the stock breaks $100 now, we like selling the 85/80 put spreads. If you have a little hair on your chest, go ahead and sell the 90/85 put spreads for some more juice.
We’d like to sell Bank of America (BAC) 11/9 put spreads, but the market doesn’t think below 11 is a real possibility, so there is almost no premium in that spread -- only about 24 cents, not enough for us to tie up margin. So we’ll just keep rolling our short 12/10 put spreads on the name until it finishes above $12 on an options expiration.
Regarding gold. We should have been quicker on adding to our Market Vectors Junior Gold Miners ETF (GDXJ) position when it hit $36 and change. If the ETF gets a little closer to $38, we’ll probably add another 100 shares and then add again if we get another shot closer to $36. We continue to like the possibility of M&A in the gold miners, as well as higher gold prices on tighter supply.
Finally, we really like the Banco Marco (BMA) trade from Tim Seymour as a way to play the grain market from Argentina. Argentina is one of the top four grain producers in the world, and Tim suggested BMA, which is trading at just 12.17 times earnings with a close-to-2% dividend, as a way to play it. The company has $12.82 per share in cash and nearly twice the cash on hand as its debt -- we love to see healthy balance sheets like that. When we saw Dennis Gartman a few months ago, he liked the small Midwest banks in Iowa for a way to play the U.S. grain markets, and now Seymour has BMA for Latin American grain markets. We’re a buyer of BMA here. We’ll add if it weakens.
Thanks for tuning in, hope you’re having as good an expiration as we are! Enjoy your weekend.
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