Trade Summary: February 17, 2015
February 17, 2015
Trade Rationale
Much of the focus on the US financial markets in 2015 is on interest rates. Is this going to be the year the Fed raises rates? If so, by how much?
First off, there’s no easy answer. Very smart people across the investments world disagree on this subject. Some believe this summer is the first time we’ll see a Fed rate hike. Other believes it won’t happen in 2015. Even if a rate hike does happen this year, it may be nothing more than a 25 basis point increase.
Part of the complexity behind the decision is the US economy. On one hand, the employment situation keeps looking better and better. On the other hand, several other areas have been disappointing so far in 2015. Perhaps most importantly, we’re not seeing any signs of inflation – the primary reason the Fed would raise rates.
Given the lack of inflation, I’m inclined to believe 6 months is the absolute floor for how long it will be until we see a rate hike. Unless inflation picks up in the very near future, we’re probably talking about the last quarter of 2015 at the earliest. Given this forecast, it makes good sense to find high yielding dividend stocks to invest in. A strong, consistent dividend is one of the best ways to invest in a low-rate environment.
Of course, other savvy investors know this, and will continue to buy up high dividend stocks offering a safe dividend in 2015. That’s why I’ve picked these three companies to buy calls on.
First off, we’ll go with Apollo Global Management (APO). Apollo is a large, diversified investment manager. It manages hedge funds, mutual funds, real estate funds, private equity funds, and fixed income strategies for its clients. When a company like APO goes public, one of its primary focuses is returning money to shareholders. As such, I believe APO’s dividend is safe. Even better, it’s yielding 14.5% right now.
Another company that fits the bill is General Cable (BGC). The struggling global economy has pushed cable sales down and it’s made BGC an attractive buy. The company offers a 5% dividend and still generates plenty of cash. Recently the stock has been moving higher as investors realize what a bargain it’s been trading at lately.
Finally, we’re going to look at a bank… but not just any bank. We’re going to buy calls on Banco Santander (SAN), the largest bank in the Eurozone. The share price has taken a hit due to economic troubles in Europe, but the company is in absolutely no danger of becoming insolvent. Meanwhile, the stock is paying a lofty 9.2% dividend.
Keep reading for the details of each trade.
Trade Details
#1) Buy Apollo Group Management (APO) June 20th 22.50 Calls up to $2.45
For this trade, we’re looking for upside in APO. Our first profit point for conservative traders is at $26. For aggressive traders, you can hold up to $29. For risk control, the conservative exit level is $21. $19 is the final exit level for aggressive traders.
#2) Buy General Cable (BGC) May 16th 15 Calls up to $1.50
With this trade, we’re also looking for an upward move. Our first exit point for conservative traders is at $17.50. For aggressive traders, you can hold to $21. For risk control, the conservative exit level is $12. And, $10 is the final exit level for aggressive traders.
#3) Buy Banco Santander (SAN) June 20th 7 Calls up to $0.75
Finally, we’re looking for SAN to move higher as well. Our first profit-taking exit point for conservative traders is at $8.50. For aggressive traders, you can hold up to $9.50. For risk control, the conservative exit level is $6.50. $6 is the final exit point for aggressive traders.
Category: AOA Trade Summary
