Precision Castparts Corp. (PCP) reached an all-time high Wednesday after an analyst with Credit Suisse raised the target price for the stock to $87. The stock closed Wednesday at $81.40.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_01_04_Precision.mp3 .
The analyst pointed to Precision’s increased market share and consistent earnings. The analyst has rated the stock as “Outperform.”
The company acquired GSC Foundries and Special Metals Corp. recently. Both of the acquisitions have been performing well for Precision.
Acquisition of GSC Foundries:
GSC is a private company engaged in the manufacturing of aluminum and steel parts for the aerospace, energy and medical industries. The GSC deal is expected to be finalized in April 2007.
Precision Castparts CEO Mark Donegan stated the acquisition fits nicely with the company’s existing operations and will help to expand its market share.
The company’s stock has been doing extremely well. It started the year at around $53 a share and has risen about 60% last year.
Company Profile:
Precision Castparts manufactures metal components and products for aerospace and industrial gas turbine applications. The company has four segments: Cast Products, Forged Products, Fastener Products, and Industrial Products. The company’s products are primarily used in high-tolerance aircraft and turbine applications. Precision Castparts was founded in 1949 and is based in Portland, Oregon.
Competitors:
Competitors for PCP include: Alcoa Inc. (AA), and ThyssenKrupp AG (private).
Potential Trades:
| Covered Call – PRECISION CASTPARTS CORP (PCP) $81.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
%Dnsd. Prot. |
%If Inch. |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PCPBP | 07 FEB 80.00 | $4.30 | 5.30% | 3.80% | 3.80% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — PRECISION CASTPARTS CORP (PCP) $81.40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
%Return | Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PCPBO | 07 FEB $75 | $7.60 | PCPBN | 07 FEB $70 | $12.30 | 6.40% | 74.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PCPBP | 07 FEB $80 | $4.30 | PCPBN | 07 FEB $70 | $12.30 | 25.00% | $78.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered calls stock options position is in-the-money, offering 5.3% downside protection and a potential profit of 3.8% (45 days) if the stock remains unchanged.
The second and third trades are bull call debit spreads. The two trades offer 6.4% and 25% potential profit if the stock remains unchanged or increases. If the stock decreases below the break-even price, the investment begins to lose money. If the stock price goes below the lower strike price, the entire investment is lost.
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[tags]GSC Foundries, Special Metals Corp., Mark Donegan, Portland, Oregon, ThyssenKrupp AG, AA, ALCOA Inc., PCP, Precision Castparts Corp., bull call debit spreads, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]