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Donald Johnson  

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  • What's Going On At General Electric? [View article]
    Pardon me for counting my money in public. :)

    Here are the trades:

    9.14.15. 32 days to expiration. GE $24.72. Sold 100 GE Oct 16 23 puts for $0.30.

    9.21.15. 25 days. GE @ $25.01. Sold 100 GE Oct 16 26 calls for $0.19 a share.

    Kept 100 shares naked.

    10.5.15 close $26.82.

    If I had to cover today, I would have to buy back my calls for about .84-.19-.30=.35 or $35 per contract on the covered call trade. On that trade I'm $26.82-$25.01-$35=$146 per 100-share options contract.

    On the puts trade, I'm up $26.82-24.72= $110 per contract, not including the puts premium applied to the call trade buy back.

    Of course, since I sold the calls, I've also made $26.82- 24.72 = $2.10 per share, or $210 per contract on the stock that I didn't sell puts or calls on.

    So far, I'm up $146+$110+$210= $466.

    If I hadn't sold the puts or calls, since 9.14, I would have made $26.82-24.72= $2.10/share, or $210 per contract and $630 on the 300 shares.

    Despite making conservative trades, I have so far reduced my take by about 30.8%.

    I may do better or worse over the next 11 days before the options expire.

    If anyone wants to check my arithmetic, please be my guest. Anyway, this is where I am on GE at the moment. My figures don't show my actual shares or commissions.

    Nobody can predict markets. But you can manage your risks.
    Oct 5, 2015. 07:33 PM | Likes Like |Link to Comment
  • What's Going On At General Electric? [View article]
    Immelt, Pelz and Garden are long-time friends.

    Obviously they respect each other. The hedge fund guys believe Immelt can deliver.

    And Immelt is flattered to have them buy GE stock.

    A vote of confidence from Peltz is good for Immelt. And you can bet that Immelt will do all he can to earn that confidence.

    That is good news for shareholders.

    Last month I went long on GE by selling GE Oct. 15 23 puts. I already owned the stock and want to buy more shares, especially if I can get them for $23, which is below my $24.79 average price.

    I also sold the same number of GE Oct 15 26 calls, which are covered by an equal number of shares of GE I've owned most of this year.

    At the same time, I let another chunk of GE shares go uncovered and have endured the ups and downs of the last couple of weeks.

    So I'll make a premium on the puts, which will expire worthless. If I made that trade at least once a month with the same results, I'd get an annualized return of over 14%.

    My covered calls are in the money. My plan at the moment is to use the premiums from the call and put sales to help cover the cost of buying back the calls. With 10 days to go on the options contracts, only time will tell whether I'll want to buy back the calls or will need too. If the stock falls back below $26 and stays above $23, I'll pocket both premiums.

    Meanwhile, I may write covered calls on my remaining GE shares at a strike price that is way out of the money and is unlikely to be reached by the time the call options expire.

    Since I believe the stock will top $30 or more in the next three years, I probably will do all I can to keep the stock. And I'll write (sell) some more puts, which might give me a chance to pick up some more GE at lower prices.
    Oct 5, 2015. 06:40 PM | 2 Likes Like |Link to Comment
  • The Two Health Care Markets [View article]
    HCA is buying a lot of group practices and clinics.
    Sep 30, 2015. 02:41 PM | Likes Like |Link to Comment
  • Kinder Morgan: 7.3% Yield And 10% Dividend Growth? I'm Buying Again [View article]
    Buying a falling knife is a sure route to self-decapitation.
    Sep 30, 2015. 02:23 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan: 7.3% Yield And 10% Dividend Growth? I'm Buying Again [View article]
    Managements are notorious for changing metics to make their stocks more attractive to unsophisticated speculators. I think that's what KMI and MLPs are doing. But their game seems to be up as their stock prices are plunging despite their supposedly non exposure to oil prices.
    Sep 30, 2015. 02:22 PM | 3 Likes Like |Link to Comment
  • General Electric: Why I'm Doubling Down On This 4% Yield Play [View article]
    Rich, Good trading. I'm 30% in equities with a couple of mutual funds and 16 stocks that I write covered calls and puts on, depending on what the markets offer.

    I didn't really get back to trading until July after letting the markets intimidate me for way too long. Now I'm trading weeklies and monthlies and waiting for the bear market to turn.
    Sep 29, 2015. 10:35 AM | Likes Like |Link to Comment
  • General Electric: Why I'm Doubling Down On This 4% Yield Play [View article]
    On. 9.14.15 when GE was at $24.72, I sold GE Oct 16 $23 strike puts on it for $0.30 a share. If uncalled, my immediate return in 32 days will be 1.21%. If I did that trade monthly at the same 30 cents and stock price, my annualized return would be about 12 x .0121 =14.52%.

    If the stock is assigned at $23, I can accept assignment for a net price of $22.70, or at a discount of 8.2% from the price of the stock when I made the trade. Selling puts is a bullish strategy used by those who want to buy the stocks they sell puts on. I'd be happy to add some shares at $23. Tomorrow, I may sell some more GE puts at the $22 strike.

    The dividend yield would be .92/22.70 = 4.05%. I currently have a covered call position on some of my other GM shares that will yield me about 0.77% in a 25-day trade. Combined with a 3.71% yield based on my GE stock purchase price, that would produce a dividend plus annualized covered call yield of 12.91%, give or take, plus capital gains or minus capital losses over the 12 months.

    I'd be happy with that.

    The Morningstar estimated fair value is about $30 with a $21 consider buy price and a $40 consider sell price.'s estimated fair value is $29 with a range of $25 to $33. I assume those targets will be reached, if ever, in less than three years.

    The point and figure chart price objective is $27.50.

    Currently, I don't think I'll be assigned the shares because I don't think GE will sink below $23.
    Sep 28, 2015. 10:55 PM | 2 Likes Like |Link to Comment
  • Our Daughter's Millennial DGI Portfolio: Project $1 Million [View article]
    I prefer to look at the latest dividend increase and the increases in the previous two or three years. In my research I've found too many dividend growers that have sharply curtailed their dividend growth in recent years but still look good on a five-year average. If the rate of growth is declining, wouldn't that worry you?
    Sep 28, 2015. 10:32 PM | 2 Likes Like |Link to Comment
  • The Two Health Care Markets [View article]
    rational2168: Good points. When do you expect the leukemia breakthroughs. Next year, 5 years, 30?

    Donald E. L. Johnson

    SA faked me or forced me to create a 2nd account a few weeks ago. I accidentally signed into that account for my earlier comment. This is my long-time account.
    Sep 28, 2015. 01:25 PM | Likes Like |Link to Comment
  • Abbott Aligned For Long-Term Growth [View article]
    I usually don't buy stocks with a VBI of less than 7 or 8. Also, even some VBI 9 and 10 stocks have lousy technicals, which keeps me from buying them. I don't understand how a stock with sell technicals can be rated a 9 even if Valuentum does place a higher weighting on fundamentals than on market momentum for a stock.

    The other thing that is beginning to bug me is discounted cash flow analysis. It may be the best way to guess where a company is going, but it doesn't allow for "black swans" for individual stocks or for the markets.

    Bends in the road are unpredictable. Ask Volkswagen.
    Sep 23, 2015. 07:12 PM | Likes Like |Link to Comment
  • Wall Street Analysts Find Themselves In The Danger Zone [View article]
    Analysts' problems:

    1. Companies often try to mislead reporters, analysts and, ultimately employees, regulators, shareholders and customers.

    2. Once an analyst recommends a stock, he's not inclined to undermine it when there is bad news. He's invested, one way or another, and his job is on the line.

    3. Incompetence and weak models, resources, etc.

    4. Lazy.

    5. Overworked–covering too many stocks.

    6. Investment banking concerns.

    7. Need to have access to the companies for data, comments, invitations to "analysts days", which often feature nice gifts, great meals and accommodations and a chance to mix with peers and executives.

    8. Integrity.
    Sep 23, 2015. 07:02 PM | 3 Likes Like |Link to Comment
  • Why We're Changing Our Tune On Procter & Gamble [View article]
    I'll make over 10% in dividends and covered call premiums this year while the price of PG has plunged. I bought PG on the restructuring news, which I expect will allow me to recover my capital losses in a couple of years, assuming the market doesn't go into a 1970s type of bear market.

    After the stock bottoms, I'll buy some more PG.
    Sep 23, 2015. 04:34 PM | 4 Likes Like |Link to Comment
  • GE to move ~500 turbine jobs overseas due to Ex-Im bank closure [View news story]
    Critics understand the politics and economics of crony capitalism, and we don't like it or think it works.

    Although I own GE, CAT, GM and other big companies, I don't think they should be subsidized nor bailed out by taxpayers. Capitalism works best for all when failed companies are allowed to go away and new ones take their places. It doesn't work when failing companies are subsidized and bailed out. See Europe, which is a mess.
    Sep 15, 2015. 06:04 PM | 1 Like Like |Link to Comment
  • GE to move ~500 turbine jobs overseas due to Ex-Im bank closure [View news story]
    Jeffery Immelt is the ultimate crony capitalist who allows liberal fascists to intimidate him and buy his support and loyalty with pork.

    Almost all of GE's businesses depend on government spending and pork. Like the U.S. Chamber and the Business Roundtable, GE executives look out for themselves first. The welfare of their employees and America is not important.

    Bullying politicians and voters is standard operating procedure for GE, just like its liberal political cronies—Obama, the Clintons, etc.

    Announcing the shift of 500 jobs to France is just another example of how GE tries to bully politicians who are trying to serve taxpayers and all of their constituents. The same goes with its announcement that it won't move its headquarters to Dallas because local members of Congress oppose the corrupt and bloated Ex-Im bank.

    I suspect the jobs are being moved for reasons unconnected with the Ex-Im bank. But GE needed a club to use in the Ex-Im bank fight and the holders of the jobs being moved probably "deserve" to be sacrificed for GE's political agendas.

    Meanwhile, if your city and state get GE's new headquarters, you'll know your local politicians are pretty dumb and greedy as well as being on the take from crony capitalists like GE. Your community never will make enough off GE to pay for the subsidies and tax credits that GE will demand in exchange for moving to your town.

    As a GE shareholder, I'm delighted that the company is winning business abroad. And as a tax payer and American citizen, I'm also happy that we're not subsidizing GE or its customers.

    I hope Congress finds a way to pay GE back for its lack of intellectual integrity and loyalty to its American employees and to the country.

    Congress can start by permanently killing the Ex-Im bank and shutting all tax loopholes used by GE and the bank's other big customers and Ex-Im supporters such as Boeing.
    Sep 15, 2015. 04:01 PM | 4 Likes Like |Link to Comment
  • 5 Counterpoints To The Puzzling Attack On Alibaba [View article]
    1. Valuentum never should have recommended a company based in China where there is no rule of law and dictators can sink companies in a flash.
    2. We're supposed to believe BABA vs Barron's? Gimme a break.
    3. You're readers are not Warren Buffet. Our time horizons are in the single digits of years, not 20 to 30. You can't predict one year, much less more than one.
    4. Accept that BABA was a bad call. You should have dumped it after it fell 7% to 10%. Holding on to losers is a losers' game.
    5. Barron's nailed it when it questioned BABA's claims about the number of its users and their spending.
    6. I didn't buy BABA when Valuentum recommended it at $90 after its IPO at about $68. And I'm glad I didn't. IPOs are for Wall Street institutional insiders and usually leave individual speculators feeling like the suckers they usually are.

    Sorry to be harsh, but this is how I feel about it.

    PS: I've followed Jonathan Laing's work at The Wall Street Journal and Barron's for more than 40 years. He's solid and an outstanding reporter and analyst.
    Sep 14, 2015. 09:16 PM | 6 Likes Like |Link to Comment