Today on the PowerOptions blog, we will take a look at four promising companies from Warren Buffet’s stock portfolio. Buffet is known for his value hunting and his patient and long view style. In 1997, he penned the line, “Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.”
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_07_03_Berkshire.mp3
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Another quote showing Buffet’s temperance is the following often-noted line, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
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Moving on from our oversimplified characterization of the notable sage and world’s second richest man’s investment style, we will take a quick look at the news surrounding some of his prominent holdings.
BNI:
Burlington Sante Fe. It has been widely noted by experts the rising popularity of ethanol may mean large long-term profits in several sectors. Railroads seem likely to benefit because they have to deliver resources to where the ethanol is made and carry the ethanol, once produced, to the more populous US coastal cities.
USG:
This symbol represents property and casualty insurer Commerce Group. The company said last Friday it plans to increase its stock buyback to a total of 5 million shares. Previously, the company stated its stock buyback would constitute 2.1 million shares. Stock buybacks are similar to insider transactions because it may indicate the board feels its own company will provide the best return on its surplus capital.
MCO:
Moody’s Corporation raised its 2007 earnings guidance last month. The rationale behind the increased projection resulted from increased growth expectations for U.S. structured finance.
COP:
Earlier this week, Conoco said production would be expected to be lower because of scheduled maintenance in the North Sea as well as its move away from Dubai. Although Conoco’s deceased production isn’t exactly a ringing endorsement signaling buy, we should remember Buffet’s long-term perspective. And for the long term, gas prices are likely to continue their northward trek.
Looking at this News from an Options Trading Perspective:
Finding the right option trade can be difficult for investors if they don’t have a solid search tool to help them identify trades. Option data and information is often cumbersome and difficult to find. An option investor requires the aid of a reliable tool to help them with the difficult task of identifying solid option trades.
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Potential Trades:
All of the following option trades have 47 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
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| Company Name |
Symbol | Stock Price |
OPTION | Strike Info |
Opt Bid |
Net Cost |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| Moodys Corp. | MCO | 62.04 (-0.16) | MCOHM | 07 AUG 65.0 (47) | 2.25 | 59.79 | 3.6 | 3.8 | 8.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| USG Corp. | USG | 49.18 (+0.14) | USGHJ | 07 AUG 50.0 (47) | 1.6 | 47.58 | 3.3 | 3.4 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ConocoPhillips | COP | 80.01 (+1.51) | COPHP | 07 AUG 80.0 (47) | 2.8 | 77.21 | 3.5 | 3.6 | 3.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Burlington Northern Santa Fe Corp. | BNI | 86.52 (+1.38) | BNIHQ | 07 AUG 85.0 (47) | 4.4 | 82.12 | 5.1 | 3.5 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MCO – The Moody’s Corp trade involves the August $65 call option and offers 3.6% downside protection and 8.7% potential profit if the stock is above the $65.00 strike price at the end of the option period. The stock is currently trading at $62.04.Competitors for MCO include: Dominion Bond Rating Service Limited (private), Fitch Ratings Inc. (private), Standard & Poor’s (private), and McGraw-Hill Co. Inc. (MHP).
USG -The USG Corp. trade involves the August $50 call option and offers 3.3% downside protection and 5.1% potential profit if the stock is above the $50 strike price at the end of the option period. The stock is currently trading at $49.18.
Competitors for USG include: Georgia-Pacific Corporation (private), New NGC, Inc. (private), Compagnie de Saint-Gobain (private), and Eagle Materials Inc. (EXP).
COP – The Conoco trade involves the August $80 call option and offers 3.5% downside protection and 3.6% potential profit if the stock is above the $80 strike price at the end of the option period. The stock is currently trading at $80.01.
Competitors for COP include: BP plc (BP), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Anadarko Petroleum Corp. (APC), Chesapeake Energy Corp. (CHK), Devon Energy Corp. (DVN), Hess Corp. (HES), Quicksilver Resources Inc. (KWK), and Western Refining Inc. (WNR).
BNI – The Burlington Northern Santa Fe Corp. trade involves the August $50 call option and offers 5.1% downside protection and 3.5% potential profit if the stock is above the $50 strike price at the end of the option period. The stock is currently trading at $49.18.
Competitors for BNI include: Canadian National Railway Company (CNI), CSX Corp. (CSX), Union Pacific Corp. (UNP), Canadian Pacific Railway Ltd. (CP), Kansas City Southern Indus. Inc. (KSU), Norfolk Southern Corp. (NSC), and Pacer Intl. Inc. (PACR).
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[tags] Warren Buffet, Dominion Bond Rating Service Limited, Fitch Ratings Inc., Standard & Poor’s, Georgia-Pacific Corporation, New NGC, Inc., Compagnie de Saint-Gobain, APC, Anadarko Petroleum Corp., BP, British Petroleum Co., CHK, Chesapeake Energy Corp., CNI, Canadian National Railway Co., CP, Canadian Pacific Railway Ltd., CSX, CSX Corp., CVX, ChevronTexaco, DVN, Devon Energy Corp., EXP, Eagle Materials Inc., HES, Hess Corp., KSU, Kansas City Southern Indus. Inc., KWK, Quicksilver Resources Inc., MHP, McGraw-Hill Co. Inc., NSC, Norfolk Southern Corp., PACR, Pacer Intl. Inc., UNP, Union Pacific Corp., WNR, Western Refining Inc., XOM, Exxon Mobil Corp., covered call investment strategy, investment strategy, iron condor, options trading, poweroptions, stock option trading, stock options [/tags]