Seeking Alpha
Recommended for you:
Profile| Send Message|
( followers)  

If one were to be bullish on US equities, one should check out the following call portfolio. Especially, if QE 3 is issued tomorrow.

Sample $ 10,000 Portfolio

4 Apple (NASDAQ:AAPL) Jan 21 '12 $475 Calls, 1,000 per = $4,000
10 Citigroup (NYSE:C) Jan 19 '13 $42 Calls, 200 per = $2,000
80 Bank of America (NYSE:BAC) Jan 19 '13 $12.50 Calls, 50 per= $4,000


If I had to own one stock as 100% of my portfolio for the next five years it would be AAPL. Barring calamities, the stock could easily reach $1,000. Achieving the current market capitalization in cash in 5 years is also within reach. Like an ideal certified financial planner, Apple has perfectly preserved capital. It has also enjoyed clairvoyant business vision. While I admit I'd rather have Steve Jobs as the jockey, I'll take his protege, Tim Cook, with Jobs as the trainer.

Simplification has led to market share domination. Rather than saturate the brand, time, and talents by developing a plenitude of products for each market, it has chosen to perfect one product at a time for each market. And, it has worked out beautifully. Take notes, Research in Motion (RIMM).

Furthermore, any responsible AAPL conversation has to mention greater China. It has enjoyed 100%+ year-over-year growth in the region for years, and it will act as a major catalyst if Apple were to reach a four digit pps. Equally important and neglected facts are the brand power and conversion factor. The iPhone/iPad is a gateway drug for the company. The brand, the high.

P.S. - iPhone 5 is coming out next month and Sprint (NYSE:S) is entering the fray (think how Verizon (NYSE:VZ) has impacted earnings).

For one to be bullish on equities, the "economic recovery" must continue. Over the past 10 years, financial stocks have provided market direction for the rest of the market. Therefore, if the markets were to be healthy again, banks would be as well.

So, if Bank of America and Citigroup were to realize their 52-week highs of 2011 by 1/19/13, of 15.31 and 51.50 respectively, the following gains would occur. BAC calls would be sold for $ 2,810 each, a 562% gain, or $22,480 total. C calls would be sold for $ 950, a 475% gain, or $9,500 total. With two earnings reports due before 1/21/12, $500 is a reasonable price target for Apple. If achieved, the calls would be sold for $2,500 each, or $10,000 total.

The end portfolio would be worth $41,980. Not too shabby nor unrealistic if you wear rose colored glasses in these stormy times. I think we break out of the trading range sooner rather than later. Unfortunately, the direction remains foggy. I wanted to offer fundamentally sound ideas for if we break to the upside. Personally, I am bearish, but have began to understand the importance of having back-up plans to be able to implement stat.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.

Source: Bullish $10,000, 3 Stock Call Portfolio