Author: btsvcs

CTRL 2017-06-18

I have been assigned the call from my last position in QIWI. That was approximately a 10% gain for about 44 days. This turned out to have been one that I could have used management techniques to capture more out of this.

I bought this at $18.63 and 45 days later it QIWI closed at $25.20. By selling a covered call at $20.00 I missed the last $5.20 past that $20.00 a share. I am OK with this, because I was receiving a good return in a short time frame and it was a successful trade.

I now have cash available to find another opportunity. I came across CTRL

I bought 100 shares as a market order to be executed tomorrow 2017-06-19. The last price was 19.35 and I need to place the sell to open for a covered call with the $20.00 call. The Jul 21st is going for bid: .80 and ask: 1.00. I will be asking for .90 a contract. 

This will be $65 in capital gain (20.00 – 19.35) and $90 in option premium. This will be approximately 8% return for 33 days

Control4 first came to my attention when it appeared in IBD50 in Investor’s Business Daily, VOL 34 NO 8, Week of May 29, 2017 at #10. The closing price was $18.07. The stock climbed higher and is currently pausing.

A recommendation from Allen Ellman and most of the the books on covered call writing is: Do not sell a call during earnings reporting period. This is due to volatility. So, I then checked EarningsWhisper: CTRL for the next earnings release. That is for Aug 3 so the July call option is available

Remember to do your own due diligence. This example is used to illustrate a trade.

The upside is $20.00 and with the option premium my effective purchase price is 18.55.

The down side at an 8% loss would be $17.06 and based on the chart if this point is touched then the downtrend will be larger.

Checking the Fundamentals for a profitable company:

Net Profit Margin tells you that out of every dollar of sale .03 hits the bottom line. These are low but the overall market action is positive

P/E excluding extraordinary items (TTM) 67.2 – This is low compared to industry. I am not bothered by high P/E ratios. William O’Neil discusses this at length and I highly recommend reading his books Reading List

P/E Normalized (MRFY) — 35.5 and is lower than industry average

P/Sales (TTM) 2.2 You’re buying the company 360% of revenue and anything under 2 is considered cheap.

They have some cash on hand:
Current Ratio (MRQ) 3.9
Quick Ratio (MRQ) 2.9
LT Debt/Equity (MRQ): 0
Total Debt/Equity (MRQ) 0.1

The amount of debt is a large reason I chose this company over other opportunities I considered.

I like companies without a lot of debt, because that commits revenue. This company has no debt. So, if it needs quick cash it will be able to meet short term needs it will be able borrow for the money. This is why the Quick Ratio does not bother me.

Return on Equity (TTM) 5.43%

Sales (5Yr) 17.46%

EPS (TTM over TTM) -23.83% Warning sign

Tangible BV per share (MRQ) 5.79 This should be bottom line in pricing for liquidation

Let’s look how this is currently trading. Cover call strategy requires a positive overall trend. Starting with a longer view point helps give some perspective on the current trading cycle.

The charts are from bigcharts.com
5 yr chart

Next 1yr weekly chart.

6 Month Chart.

Bryan

I am purchasing 100 shares and the current price is 19.03

I think that this will be higher than 20% on the up side. Cut losses at 8% and looking at the charts it should find support around that level.

Remember to do your own due diligence.

Looking at these numbers I want to own this stock outright, but will be considering writing a covered call against this with a bounce in the stock price. Right now this is oversold and the margins are pretty good. These are lower than industry, but my portfolio size limits my choices. These numbers currently are from Scottrade.com

P/E excluding extraordinary items (TTM) 10.5 – This is low compared to industry and S&P

P/E Normalized (MRFY) — No earnings

P/Sales (TTM) 1.4 Very Low. You’re buying the company 140% of revenue and anything under 2 is considered cheap.

They have cash on hand:
Current Ratio (MRQ) 2.6
Quick Ratio (MRQ) 2.1

They are heavily leveraged 65% of company is debt, but this could be a good thing right now if they took on the debt to expand capasity
LT Debt/Equity (MRQ) 0.5
Total Debt/Equity (MRQ) 0.6

Return on Equity (TTM) 37.00% =Net Income/Sales 37 cents hits the bottom line for every dollar of sales

Sales (5Yr) 13.53%
EPS (TTM over TTM) 305.25%

Tangible BV per share (MRQ) 10.28 This should be bottom line in pricing

Let’s look how this is currently trading. The charts are from bigcharts.com

5 yr chart

1 year chart with 20 EMA, because I’m considering options for this and that’s approximately 1 month

I am looking for support at the 20 EMA. Looking at a 6 month chart, this is still in positive territory with the MACD and oversold with Stochastic

NASDAQ Analyst Rating is a strong buy

2017-05-14

I didn’t sell during this earnings period and closed out my position. These values include commissions with a small account.
I bought at 19.32
I sold at 21.89
That was $257 profit in capital gain

I sold one call and received 42.30
I sold another call and received 67.30
That’s $109.60 in yield

Total profit $367 in 3 months on 1932 = 18%