Stock Option Advisory

The Companies We Love to Hate – Microsoft and Wal-Mart Covered Calls

Two bits of news caught the PowerOptions‘ blogs attention today: Microsoft (MSFT) releases Halo 3 with over $170 million first day sales and Wal-Mart (WMT) is expanding its $4 generic drug program.

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These two much-maligned companies are often the objects of contempt for a multitude of groups. But the fact remains most people love and use the products these companies peddle. From the $14 ironing board to the MS Excel, these two are the standard bearers of our times. Their stocks, however, reflects an investor belief that strong growth isn’t likely to come from either of the two companies.

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Consider first Wal-Mart with its 21% return on equity and over 40% quarterly earnings growth. Their P/E looms around 14.5 while Target (TGT), despite their recent earnings correction, has a P/E of around 18.5.

In the news, Wal-Mart announced today it would sell the popular fungal medication, Lamisil, for $4. The company also indicated it would sell two popular birth-control drugs for $9. The company hopes to lure more young women into their stores with this offering.

Microsoft’s price is a bit of a puzzle. Granted, they’ve seen about a $1 per share bump in the wake of Halo 3. The company has a profit margin of 27%, but is consistently valued less (in P/E terms) than its peers.

On the downside, Microsoft is under relentless criticism from bloggers over its giving a $10 Billion valuation with its offer of around $500 million for 5% of the company. Also, the European commission turned down an appeal request on the ruling of Microsoft’s Windows having a virtual monopoly.

Interestingly, Microsoft is infinitely more open in its operating system than Apple’s OS10. What would European courts do to Apple (AAPL) if a similar case were brought to bear on their operating system, iTunes, or the iPhone? The Apple crowd would be incensed.

Are the American public’s favorite corporate whipping boys going to see stock gains in the near-term? It is difficult to tell, but in the following analysis, we will assume the stocks are undervalued and look at covered call trades involving the two stocks.

Potential Trades:
Whether you agree with the premise of this blog or not, one thing is for sure; when attempting to identify the best option trades, a great place to turn is PowerOptions. Their patented search engine can whip out trading alternatives in no time flat. So an investor can be sure they have identified the best option trading position possible.

All of the following trades have 114 or 86 days until expiration depending on whether they are January or December covered calls.

Covered Call Search
Symbol Stock
WMT 43.75 (+0.45) WMTAI 08 JAN 45.0 (114) $1.75 42 4 4.2 7.1
MSFT 29.51 (+0.01) MSQAK 08 JAN 30.0 (114) $1.40 28.11 4.7 5 6.7
WMT 43.75 (+0.45) WMTLI 07 DEC 45.0 (86) $1.45 42.3 3.3 3.4 6.4
WMT 43.75 (+0.45) WMTAV 08 JAN 42.5 (114) $3.10 40.65 7.1 4.6 4.6
WMT 43.75 (+0.45) WMTLV 07 DEC 42.5 (86) $2.85 40.9 6.5 3.9 3.9
MSFT 29.51 (+0.01) MSQAY 08 JAN 27.5 (114) $2.95 26.56 10 3.5 3.5
(For more details click the ticker symbol above)

Competitors for WMT include: Autozone Inc. (AZO), Bed Bath & Beyond Inc. (BBBY), Best Buy Co. Inc. (BBY), Big Lots Inc. (BIG), Brown Shoe Co. Inc. (BWS), CSK Auto Corp. (CAO), Circuit City Stores Inc. (CC), Casual Male Retail Group Inc. (CMRG), Conns Inc. (CONN), Costco Companies Inc. (COST), CVS Corp. (CVS), Dicks Sporting Goods Inc. (DKS), Inc. (DSCM), Family Dollar Stores Inc. (FDO), Foot Locker Inc. (FL), Freds Inc. (FRED), Hibbett Sporting Goods Inc. (HIBB), Kroger Co. (KR), Nash Finch Co. (NAFC), 99 Cents Only Stores (NDN), PetsMart Inc. (PETM), Payless ShoeSource Inc. (PSS), Rite Aid Corp. (RAD), Renters Choice Inc. (RCII), Sally Beauty Holdings Inc. (SBH), Sears Holdings Corp. (SHLD), Spartan Stores Inc. (SPTN), Stage Stores Inc. (SSI), Supervalu Inc. (SVU), Safeway Inc. (SWY), Target Corp. (TGT), Walgreen Co. (WAG), Winn-Dixie Stores Inc. (WINN), and Zale Corp. (ZLC).
Competitors for MSFT include: Google Inc. (GOOG), International Business Machines Corp. (IBM), Oracle Corp. (ORCL), Apple Computer Inc. (AAPL), Adobe Systems Inc. (ADBE), Borland Software Corp. (BORL), Convera Corp. (CNVR), Cognos Inc. (COGN), Citrix Systems Inc. (CTXS), DivX Inc. (DIVX), Earthlink Inc. (ELNK), Epicor Software Corp. (EPIC), GSI Commerce Inc. (GSIC), Immersion Corp. (IMMR), Logitech Intl. SA (LOGI), Lawson Software Inc. (LWSN), Marchex Inc. (MCHX), McAffee Inc. (MFE), Macrovision Corp. (MVSN), Novell Inc. (NOVL), Openwave Systems Inc. (OPWV), Open Text Corp. (OTEX), Progress Software Corp. (PRGS), Red Hat Inc. (RHT), Research In Motion Ltd. (RIMM), RealNetworks Inc. (RNWK), SAP AG (SAP), Smith Micro Software Inc. (SMSI), SonicWall Inc. (SNWL), Sybase Inc. (SY), Symantec Corp. (SYMC), TiVo Inc. (TIVO), VMware Inc. (VMW), Wind River Systems Inc. (WIND), and Zixit Corp. (ZIXI).
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.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

[tags] AAPL, Apple Computer Inc., ADBE, Adobe Systems Inc., AZO, Autozone Inc., BBBY, Bed Bath & Beyond Inc., BBY, Best Buy Co. Inc., BIG, Big Lots Inc., BORL, Borland Software Corp., BWS, Brown Shoe Co. Inc., CAO, CSK Auto Corp., CC, Circuit City Stores Inc., CMRG, Casual Male Retail Group Inc., CNVR, Convera Corp., COGN, Cognos Inc., CONN, Conns Inc., COST, Costco Companies Inc., CTXS, Citrix Systems Inc., CVS, CVS Corp., DIVX, DivX Inc., DKS, Dicks Sporting Goods Inc., ELNK, Earthlink Inc., EPIC, Epicor Software Corp., FDO, Family Dollar Stores Inc., FL, Foot Locker Inc., FRED, Freds Inc., GOOG, Google Inc., GSIC, GSI Commerce Inc., HIBB, Hibbett Sporting Goods Inc., IBM, Intl. Business Machines, IMMR, Immersion Corp., KR, Kroger Co., LOGI, Logitech Intl. SA, LWSN, Lawson Software Inc., MCHX, Marchex Inc., MFE, McAffee Inc., MSFT, Microsoft Corp., MVSN, Macrovision Corp., NAFC, Nash Finch Co., NDN, 99 Cents Only Stores, NOVL, Novell Inc., OPWV, Openwave Systems Inc., ORCL, Oracle Corp., OTEX, Open Text Corp., PETM, PetsMart Inc., PRGS, Progress Software Corp., PSS, Payless ShoeSource Inc., RAD, Rite Aid Corp., RCII, Renters Choice Inc., RHT, Red Hat Inc., RIMM, Research In Motion Ltd., RNWK, RealNetworks Inc., SAP, SAP AG, SBH, Sally Beauty Holdings Inc., SHLD, Sears Holdings Corp., SMSI, Smith Micro Software Inc., SNWL, SonicWall Inc., SPTN, Spartan Stores Inc., SSI, Stage Stores Inc., SVU, Supervalu Inc., SWY, Safeway Inc., SY, Sybase Inc., SYMC, Symantec Corp., VMW, VMware Inc., WAG, Walgreen Co., WIND, Wind River Systems Inc., WINN, Winn-Dixie Stores Inc., WMT, Wal-Mart Stores Inc., ZIXI, Zixit Corp., ZLC, Zale Corp., covered call investment strategy, investment strategy, poweroptions [/tags]

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