I have been on sabbatical for the past year and to all my followers I apologize. I appreciated your loyalty over the past year, but now I am back and with a clear head I would like to go over the many stocks I picked a year ago. If some or all of you still hold on to them I have some ideas to protect the downside or possibly take a profit and move on the next one.
Sherwin Williams (SHW) was a stock I brought to the readers attention back in September of 2012 at $140 per share. It is currently trading at $180 per share up around 29% in the past twelve months. Not the greatest return, but a solid one in light of a troubled housing sector. People want their homes to look better but don't want to pay the contractor pricing levels. As you can see the stock is in a very nice uptrend. SHW has less than $2b in debt which for an $18b market cap is miniscule. The 52 week high is $194, so I feel $200 is a forgone conclusion and the stock will trade up to $225 once the government stops saber rattling itself. They have really "painted" themselves into a corner. If you are going to ride the uptrend make sure you lift your stops in accordance to your gains. The way this market is trading b/w 14,850 and 15,300 protecting the downside is critical.
Lumber Liquidators (LL) is another company I wrote about back in September 2012 at $44 per share. I really hope everyone held this one because it's currently trading at $108 up an impressive 145%. Well done if you had the moxie to stay long the entire time. The Fed did exactly what I had predicted, they keep mortgage rates low and pumped tons of M1 into the economy to stimulate borrowing for home building. However as you know you "cannot get emotional about stocks Gordon." It is time to write the covered call and be out of this stock. The PE ratio is up close to 50, and even though they have 0 debt I am concerned that the earnings due out shortly could spark a pre report sell off. Options expire this Friday, so the October 105 strike calls are paying roughly $4 per share. Bump up your stop loss to $105 and grab the $4 and ride off into the sunset. I will have a replacement for this after options expiration.
USG Corp (USG) if you remember was a company I wrote about when the stock was trading at around $20 a year ago, and that was after it had moved up 140%. I took a chance believing that they had come out of bankruptcy and had positioned themselves with logistic partners, and other retail outlets to increase exposure. They are still the #1 gypsum manufacturer and the stock is trading just shy of $28, an additional 40% increase from when I wrote the article. It traded to $30 but has softened a bit, I am not sure it will crack $30 and hold. I am inclined to write a $28 strike covered call going out a few months for the purpose of grabbing some nice premiums. USG does have close to $5 a share in cash, and a good amount of debt. Short position is 20% of the float and a short term cover may take the stock to $30 if their October 24th earnings report are good. I would rather go a little below that and write the $28 calls for $2. It is a nice premium and you sock away a very healthy gain. I am still not thrilled with the balance sheet and I think a lot of the upward movement has been experienced already.
I will wait until option expiration this Friday and do some Barron's reading and due diligence this weekend. There will be a new set of companies ready to purchase next week, some may have call protection right from the start others may be long holds with tight stops. Have a profitable week everyone...