The retail and financial sectors have again become attractive.   Some brokerage firms and banks have forsaken the entire 30% run-up that they have rallied in the last 2 months. 

Subprime writedowns offer investors a rare opportunity to buy MS, a high-caliber brokerage at just 1.2x tangible book value.   Looking at the premium of March strike 40 calls and puts.  I favor the put at 2.40/contract versus the calls which is paying only 1.20/contract.  I recommend writing (sell to open) the March strike 40 puts at 2.40 without purchasing the underlying shares.  The 2.40 premium per contract gives you a 2.40 downside hedge from the current share price of 39.89.  Again, this puts is termed “at the money” since the strike equals the share price.  If, in two weeks, the ahres are below 37.60, close out the puts (Buy to cover) and buy the shares.  You would have pocketed the entire premium at 2.40/contract and would have an opportunity at buying the shares lower than theyre currently today. 

LEH is a little pricier, but its earnings are going to be more predictable than most of its ilk.  The shares are trading at 46.50 as oflast Friday.  I recommend buying the shares and hedge them with the March strike 45 calls that are paying 3.50/contract.  This premium give you an intrinsic value of 1.75/contract should the shares trade above 45 in two weeks or 1.75 hedge per contract should the shares be below 45.  Either direction is attractive considering the recent pullbackon the shares. 

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Team,

The solar sector has tanken a beating as of late… This is particularly true for TSL, FSLR, SOLF, LDK.

I direct your attention to LDK which is now trading at 6 times 2009 earnings with a PEG of .12!    The earnings figures for 2008 are evident by LDK’s production plkans for the remainder of the year.  LDK is currently building a polysilicone manufacturing plant.  Fluor is the contractor, so there is no question of it being substandard. LDK has brought top level managers from such companies as MEMC Electronic Materials  to oversee all of its production and to hire and train the people necessary to run the plant.   LDK’s  earnings for 2009 will likely be close to the high estimate of $7.15.  That would mean that LDK is trading closer to 3-4 times 2009 earnings today; and it is a 100% grower.  Moreover, the company would be able to show gross margins of 40-50% with a functioning polysilicone plant in 2009.  This margin figure would be competitive with FSLR’s, which is currently trading at approximately 39 times 2009 earnings. Would you rather buy a company showing the same gross margins (40-50%) which costs 6 to 13 times less based on 2009 earnings results? Or would you rather pay for a brand name.

As of last Friday, the shares closed at 22.49 which compelled me to examine March strike 22.50 calls and puts.  Both calls and puts are paying roughly the same premium per contract: 1.40 for every 100 shares!  Since theyre identical in premium, I recommend writing either with the shares.  For example, buy the shares and and simultaneously write (”sell to open”) either the calls or puts for march strike 22.50.  Since the strike equals the share price, both option types are termed “at the money” type options.  They both offer a downside of 1.40 per 100 shares.

Be adivsed thart I have not taken a position in LDK yet.  However, I will be looking at the shares Monday morning.

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Exchange traded funds (ETF) assets totaled more than $568.7 billion of the more than $1 trillion in stock index funds as of Jan. 31, according to the Investment Company Institute.  This represents  32% increase over last year. However,  the number is down $39.7 billion from December of 2007.  Although the market offers many ETFs, few have a long history.   Very few have a one-year performance record, let alone a three-year record — arguably an important milestone — so only time will tell whether they can build solid track record over longer time periods.

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Major Earnings Announcements Company Name Symbol 3/03/08 HSBC Holdings HBC Sunrise Senior Living SRZ TurboChef Technologies OVEN 3/04/08 Chico’s FAS CHS Staples SPLS 3/05/08 Big Lots BIG BJ’s Wholesale Club BJ Costco COST Saks SKS ADC Telecom ADCT H & R Block HRB Longs Drug LDG PETsMART PETM 3/06/08 Blackstone Group BX Blockbuster BBI Urban Outfitters URBN Companhia Vale do Rio Doce RIO Marvell Technology MRVL National Semiconductor NSM VeriFone PAY 3/07/08 Ciena CIEN SkillSoft SKIL Major Economic Events Date Release For Consensus Prior 3/03 ISM Index Feb 49.0 50.7 3/05 Factory Orders Jan -1.5% 2.3% 3/05 ISM Services Feb 48.5 44.6 3/05 Crude Inventories 3/01 N/A 3231K 3/06 Initial Claims 3/01 N/A 373K 3/06 Pending Home Sales Jan N/A -1.5% 3/07 Non-farm Payrolls Feb 30K -17K 3/07 Unemployment Rate Feb 5.0% 4.9%

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Charts of the S&P 500 trading range and 50- EMA are shown below. Read the rest of this entry »

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