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Tom Armistead
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I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to... More
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  • Taking A Postion In Louisiana Pacific 11 comments
    Jan 14, 2014 4:00 PM | about stocks: LPX

    Louisiana-Pacific (NYSE:LPX) makes OSB and other materials used in construction. At a price just above $18 it has a PE of 10.8, with the hope that springs eternal, that housing will continue its recovery.

    The stock has a definite seasonality to it, it goes up about 10% from January to early May, then starts to give back.

    With shares at $18.31, I was able to buy the May 2014 15/18 vertical call spread for 2.08. The thinking was, with 10% seasonality, the odds are good that LPX won't be below $18 at expiration. If it is, the PE at that point suggests that owning the shares won't do any lasting harm. I could sell another set of calls at the 18 strike and continue that way if I wind up owning the shares.

    It returns 132% annualized if shares are above $18 at the May expiration, which I think is the most likely outcome.

    Disclosure: I am long LPX.

    Stocks: LPX
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Comments (11)
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  • Clayton Rulli
    , contributor
    Comments (2472) | Send Message
     
    I like it
    14 Jan, 05:23 PM Reply Like
  • okifarmer
    , contributor
    Comments (4) | Send Message
     
    Tom - Model a May 19/20 call vertical with the addition of a short 17 put. This risk/reward relationship with ownership a lower price point may appeal. I think of these as "unbalanced verticals" and usually give them a view when I'm considering a trade.
    14 Jan, 09:47 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » I checked it out, it looks good in terms of out of pocket cost to establish the position. In this case it fits pretty well with my opinion on the stock..
    15 Jan, 06:29 AM Reply Like
  • dancing diva
    , contributor
    Comments (2421) | Send Message
     
    Tom - how do you figure lpx has a p/e of 10.8? If I use the consensus analysts 2014 estimate of $1.22 and the price of $18.44 I get a p/e of 15.1. The ttm p/e is far higher.
    15 Jan, 09:02 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » Yahoo reports TTM earnings at 1.64. I must have picked up the ratio while the stock was under $18, 1.64 X 10.8 = $17.71.

     

    M* gives me a forward PE of 13.2, without specifying where they got the earnings estimate. FinViz provides $1.22, same as what you're using.

     

    I got the idea from a screen that adjusts PE to account for excess current assets (above a 2:1 ratio to current liabilities). The idea is that this provides some MOS and all I'm doing is betting it won't go down. The screen with the adjustment gives a PE of 7.9.
    15 Jan, 09:24 AM Reply Like
  • JYucca
    , contributor
    Comments (203) | Send Message
     
    Can you account for the p/e being 10.8? Per Yahoo I see trailing 12 months closer to a p/e of ~17 and the average expected earning of 2014 giving a forward p/e of ~15. These numbers are close to those for PKB, the building and construction etf, showing a trailing p/e of 19. The prices are anticipating growth but don't give the comfort of a low p/e.
    15 Jan, 07:49 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » JY, are you looking at the same stock?... I'm pasting from Yahoo Finance:

     

    P/E (ttm):
    11.04

     

    EPS (ttm):
    1.64
    15 Jan, 08:13 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » Or from Seeking Alpha...

     

    EPS: 1.69

     

    PE (ttm): 10.90
    15 Jan, 08:19 PM Reply Like
  • JYucca
    , contributor
    Comments (203) | Send Message
     
    Yep, that is what Yahoo shows on the main LPX page. But go to the page, "Analyst Estimates", which also shows the past four quarters of actual results as well as future expected earnings, and you will see the numbers that I gave.
    16 Jan, 12:43 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » We could all be clearer by saying what type of earnings we're using...
    16 Jan, 06:37 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Author’s reply » from SA: "Brutal winter weather has been the excuse for a long string of weak economic stats this year, but not January New Home Sales, which surged 9.6% from December to a seasonally adjusted annualized pace of 468K - a 5-year high. Expectations were for a drop to 400K. December sales were revised higher from 414K to 427K."
    26 Feb, 10:43 AM Reply Like
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