Guest Analyst: Tim Biggam, TradingBlock (August 12, 2011, 1:40am CDT)
|Symbol||Analyst Target Price||Target Date|
|KO||$68.50||Dec. 16, 2011|
With the most recent spate of market volatility, opportunities have arisen to position investors in low-beta, low P/E, decent yielding stocks that have a history of both earnings growth and raising dividends.
One of the screens employed recently was to look for stocks with a P/E at a discount to the S&P 500, a yield above the 10-year Treasuries, a payout ratio below 70, and a history of earnings and dividend growth.
One of the names that made the list was a favorite of Warren Buffett, Coca-Cola (ticker: KO). With a TTM P/E of under 13, and a forward P/E of under 12, KO is certainly not pricey, trading at a trough multiple to historic. With a yield of 2.8%, KO also provides a steady stream of income to buffer the downside. KO has also held up nicely in the recent downdraft, dropping less than 5% over the past three months compared to a nearly 15% in the overall market.
On a technical basis, KO held intermediate-term support at the 65 level, bouncing off that level strongly.
Given the relatively cheap valuation, decent yield, and lower risk profile, we like KO shares to continue to be an outperformer, with a year-end price target of 68.50.
Play of the Day
Based on Coca-Cola's (ticker: KO) current market price of $67.23 and using a target price of $68.50, a target date of December 16, 2011 and $1,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.
Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com. Powered by TradingBlock's TradeBuilder.
|Strategy (click for details)||% Return at Target||Probability of breaking
even or better
|Buy Jan Call Spread||+29%||63%|
|Buy Jan Iron Condor||+17%||59%|
|Sell Jan Put Spread||+17%||67%|
* Subject to change due to changing market conditions.
DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services.