Inexpensive stock (P/BV=0.75) consensus (BUY) and 25% target upside.
Has found a gently up-sloping channel since Feb 2016.
Currently trading at the bottom of channel.
Shows technical signs of turnaround.
Has rebounded less than the market.
Seems to have found a floor at $28.
PLAIN VANILLA LONG STRATEGY
Buy at the market.
Reward/Risk = 2x
CREDIT OPTIONS STRATEGY
Buy Dec 16 2016 $31 call = $0.55/share
Sell Dec 16 2016 $27 put = $0.60/share
Credit = $0.05/share
Worst-case: Go long at the low of the up-channel and 8% above the 52w low
(indicative prices, ref. last close)
- Let the put expire worthless and pocket $0.60/share
- Sell the call at an indicative $1.10/share
- Make a total of $1.15/share (c. 3.5% yield)
Keep position and sell puts expiring on Feb 17, 2017 with a $28 strike to bring in $0.55/share in premia (11.11% annualized).
More aggressive traders can sell the same maturity (Feb17) put with a $29 strike, cashing in $0.80/share (16.16% annualized).
We have been expecting such news flow to progressively prop the shares, as it weighed down on the shares the previous month. Expect LM to trade higher today, with shares already indicated slightly up.
The upcoming earnings release and guidance towards the end of the month should provide the next leg up. Any share weakness today should be bought into. Current holders should KEEP HOLDING.