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Tim Travis
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Tim Travis is a veteran deep value investor and money manager. Travis has extensive experience in traditional investments such as stocks and bonds, in addition to having a unique methodology of combining options and distressed investing with value investing to generate income, reduce risk, and... More
My company:
T&T Capital Management
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T&T Capital Management Blog
My book:
Learn to Treat Your Portfolio as a Business
  • Tempur-Pedic Investors Throw A Temper Tantrum-Barrons 1 comment
    Jun 6, 2012 4:26 PM | about stocks: TPX

    Tempur-Pedic (NYSE:TPX) saw its stock get halved today after the specialty mattress maker forecasted a disappointing second quarter, and lowered earnings estimates for the year. Temper-Pedic is facing increasing competition in the memory foam market where it has been dominant for years. The company boast wonderful returns on invested capital and has been growing margins through better operating leverage. I established my first few positions in the security be selling puts today. We sold the $22 January 2013 puts for $3.90 a piece. If these options expire worthless the returns would be 21.5% in 226 days, and if we end up getting exercised we will end up owning the stock at 6.5 times trough earnings. I really don't like the balance sheet much but I do believe this sell off is overdone. The positions we set were very light and are less than 15% of what we would consider to be a full position size.

    http://online.barrons.com/article/SB50001424053111904470204577450430680297626.html?mod=BOL_hps_highlight_top

    Disclosure: I am long TPX.

    Stocks: TPX
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  • lancejay
    , contributor
    Comments (99) | Send Message
     
    Excellent way of owning a stock or capturing premium over an extended period of time. I am more attuned to intermediate term trading and bought the stock today at an average price of about $23. I think this should work out nicely as the trading volume of 40+ million shares was about 18 times normal daily trading volume and Tempur-Pedic should still earn $2.70 this year meaning that it sells for less than 9 times the reduced earnings estimate.
    6 Jun 2012, 05:23 PM Reply Like
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