In a video interview yesterday, Jim Cramer (videoplayer.thestreet.com) analyzed several of Warren Buffet’s stock positions.
Cramer stated, “There are two Warren Buffet’s. There is the Warren Buffet pre-three years ago… Where if you bought on the announced date what he was buying, you made a lot of money. In the last three years, if you bought what he bought, you under performed.” Cramer supposed Buffet has either lost his edge or he is taking an even longer-term view.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_09_08_CramerBuffet.mp3
Cramer’s analysis supposed investors bought on the day Warren Buffet made the announcement. Cramer later noted if investors wait for a stock to go below Buffet’s purchase price, it has generally been a “recipe for success.”
Stocks Mentioned in the interview:
Cramer meandered on and off the topic of Warren Buffet’s stocks. The stocks mentioned below but not in Warren Buffet’s portfolio are noted.
Johnson & Johnson (JNJ) – Buffet owns $1.5 billion in shares of the company.
United Health Group (UNH) is a position recently acquired by Buffet.
US Bankcorp (USB) – Equals 1.6% of Buffet’s holdings. Berkshire bought nearly $800 million in USB stock last year.
Ingersoll-Rand (IR) – Cramer does not consider Ingersoll-Rand a good play. He made the comment, “If you think housing is going to continue to go down Ingersoll is not profitable.”
US Steel (X) and Reliance Steel (RS) – These are two companies touted by Cramer, but are not in Buffet’s portfolio. Cramer called RS, “My favorite steel company.”
Potential Trades:
All of the following option trades have 44 days until expiration. Johnson & Johnson is currently trading at $62.15. United Health Group is currently trading at $53.96. Reliance Steel is currently trading at $45.10.These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Johnson and Johnson (JNJ) $ 62.15 (44) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JNJDL | 07 APR $60.0 | $2.85 | 4.60% | 1.20% | 1.20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Covered Call – United Health Group (UNH) $ 53.96 (44) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UHBDK | 07 APR $55.0 | $1.55 | 2.90% | 3.00% | 4.90% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Covered Call – Reliance Steel (RS) $ 45.10 (44) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSDI | 07 APR $45.0 | $2.30 | 5.10% | 5.10% | 5.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Johnson and Johnson covered call trade, an in the money covered call, offers 4.6% downside protection and a potential profit of 1.2% if the stock remains above $60 or rises. The break-even price of this trade is $59.27. The net cost of this trade, per 100 options, is $3,716.00.
The United Health Group covered call trade, an out of the money covered call, offers 2.9% downside protection and a potential profit of 3.0% if the stock remains unchanged. If the stock rises above the $55 strike price, the potential profit becomes 4.9%. The break-even price of this trade is $52.32. The net cost of this trade, per 100 options, is $5,232.00.
The Reliance Steel covered call trade, an in the money covered call, offers 5.1% downside protection and a potential profit of 5.1% if the stock remains above the $45 strike price or rises. The break-even price of this trade is $42.71. The net cost of this trade, per 100 options, is $4,271.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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[tags] Jim Cramer, Warren Buffet, IR, Ingersoll-Rand Co., JNJ, Johnson & Johnson, RS, Reliance Steel & Aluminum Co., UNH, UnitedHealth Group Inc., USB, U.S. Bancorp, X, U.S. Steel Group, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]