Will Ashworth: AOL/Lorillard
The Christmas holidays must have been quite relaxing this past year, because the companies I recommended in my first two articles in early January are moving in the right direction. Three months does not give me license to boast, but it’s nice to see nonetheless.
On Jan. 3, I recommended investors sell IAC/Interactive (NASDAQ:IACI) and buy AOL (NYSE:AOL). Through the end of March, AOL is up 25.6% versus 15.5% for Barry Diller’s conglomerate of businesses. AOL CEO Tim Armstrong got a contract extension March 30 that runs through 2016. Armstrong’s annual salary remains at $1 million. But he’s been given significant bonus potential and stock-option vesting that should keep him and his team motivated as they continue turning the business around. I like AOL’s chances.
On Jan. 5, I recommended Lorillard’s (NYSE:LO) stock over Altria’s (NYSE:MO) in large part because CEO Murray Kessler has delivered excellent financial results despite being paid a measly $3.7 million a year — almost $21 million less than his Altria counterpart. Add in a very attractive dividend, and you have to like the menthol cigarette maker’s chances of continuing to outperform. Year-to-date, Lorillard’s total return is 14.9% compared to 5.5% for Altria. As I said in my article, you don’t have to be paid a king’s ransom to do good work.
John Kmiecik: Long Calls on IBM
A trade idea on Jan. 23 produced a handsome profit. International Business Machines (NYSE:IBM) just announced earnings, and the stock gapped up from a bearish downtrend and proceeded to trade higher for most of the day. The original trade idea called for an entry above the previous day’s high, which was triggered the following day. The initial target on the trade was right around $194, which was a previous high set back in December and that was reached on Feb. 1.
What was really interesting about this idea is that a trader could have taken the initial profits and looked to enter the trade again. The stock traded between $190 to about $194 close to a month.
The new trade idea could have looked for an entry once IBM traded over the $194 base. A month later on Feb. 23, IBM finally broke above and held the $194 base and proceeded to move higher. Another call option could have been purchased once the stock moved higher. In hindsight, it would have been another profitable trade idea since IBM currently is trading around $207.
That’s why it’s important for traders to review their trades and charts and learn from the past. It also will help them spot profitable opportunities in the future.