A Strategy Built for Bulls by Steven M. Sears
Summary: Goldman Sachs' (GS) portfolio strategist David Kostin thinks Q2 earnings forecasts are low. He likes big-caps due to their greater global exposure and cleaner balance-sheets, which make them less sensitive to interest rate volatility. He says big stocks are at the bottom of 20-year P/E and price-to-book ratios, and notes hedge funds have begun moving into large-caps. Goldman options strategists Maria Grant and John Marshall scanned for big-cap ($40B-plus) companies with especially high volatility premiums. They suggest selling three-month puts on: Target (TGT), AT&T (T), PepsiCo (PEP), Coca-Cola (KO), Comcast (CMCSA), Oracle (ORCL), Sears (S), IBM (IBM), Wells Fargo (WFC), Merrill Lynch (MER), Johnson & Johnson (JNJ), Morgan Stanley (MS), Amgen (AMGN), General Electric (GE), and Disney (DIS). At best, the trade pays off with extra cash. At worst, you're left with quality stocks.