QIWI 2017-04-28
I had closed out my position with TSEM and was looking for another opportunity. I had read Investors Business Daily, Vol 34. N.O. 3, Week of April 24, 2017, IBD 50. I am looking for stocks in the $15-$20 range at this time.
I spent time doing research and considered some options and #38 QIWI had came to my attention at $17.54. I’m working a strategy that is similar to Allen Ellman for covered call writing
A recommendation from Allen 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: QIWI for the next earnings release.
The next earning are going to be posted 2017-06-21. That clears this as a candidate for a covered call. I pulled up some research and placed trades for a covered call.
Remember to do your own due diligence. This example is used to illustrate a trade.
QIWI – 09:41:08
Bought 100s @ $18.6286 – Total: $1,869.81
QIWI JUN 16 2017 20.00 C – 09:42:23
Sold to Open 1c @ $0.55 – Total: $47.35
I bought 100 shares at $18.63 and gave someone the right to buy the stock from me at $20 for the next 49 days and received $.47 for that right.
This will give me $130.19 in capital gain or 6.96%.
$20.00 strike price X 100 number of shares = $2,000
Subtract my cost $2,000 -$1,869.81 = $130.19
$130.19 / $1,869.81 = 6.96%
Selling the call gives me $47.35 that I keep either way. This is 2.5% for 49 days which is a fair yield
Total Return = $177.54
This is 9.5% in 49 days
130.19 capital gain + 47.35 yield / 1869.81 cost basis
Target upside is 20.00
Close at -8% loss 17.13
I like to sell the stock and buy back the call if I’m wrong. I then use that cash for another opportunity. By doing this you can recover from the loss and receive more cash into your account by selling another call
If the stock breaks $17.13 it is within the 10% of the buy point at $16. I am a little late in this position, but I still like the company and the numbers work for me.
Checking the Fundamentals for a profitable company:
| Gross Margin (TTM) | 51.64% |
| Operating Margin (TTM) | 23.08% |
| Pretax Margin (TTM) | 17.38% |
| Net Profit Margin (TTM) | 13.92% |
Net Profit Margin tells you that out of every dollar of sale .14 hits the bottom line.
P/E excluding extraordinary items (TTM) 26.3 – 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) — 20.5 and is lower than industry average
P/Sales (TTM) 3.6 You’re buying the company 360% of revenue and anything under 2 is considered cheap.
They have some cash on hand:
Current Ratio (MRQ) 1.4
Quick Ratio (MRQ) — Warning
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) 11.22%
Sales (5Yr) 16.99%
EPS (TTM over TTM) -53.96% Warning sign
Tangible BV per share (MRQ) 2.58 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
The 5 yr chart show a break out of the consolidation period at $16
Next 1yr weekly chart. The buy point using the IBD philosophy would be at $16 as the stock cleared the previous high in Sep. Using this strategy you would not buy 10% past this point = 16 X 1.1 = 17.6. I had gotten in the position above this point and is a warning sign on this trade. Another warning sign is the decreasing volume over the past 4 weeks as the stock advances (Acc/Dist)
6 Month Chart. This is above the 20 Day EMA, above Upper Bolinger Band bar, overbought on Slow Stochastic, and has a positive MACD. Reading this I am expecting a short term pull back.
I am expecting a pull back in the stock price, but the overall trend should continue for the next 6 weeks. If the price were to drop I can buy back the call option to lock in the $47 and sell it again when the stock rebounds.
Bryan