Herm, I'd be interested in know how you would play CMGI, SUNW, and CSCO.
As you know, I am primarly a short-term in-the-money call and put player. But now I have found a group of stocks that I am interested in CC'ing LEAPS on. I have made good money trading short-term options on these stocks, but I can see that a long-term position might be even more profitable.
I am going to watch the market for the next couple of weeks before initiating a position, however, as I think things are quite unsettled. And I am worried about the year-end Y2K reaction by the public, so I am particularly interested in exit strategies.
CMGI interests me particularly. It now has a P/E of 26 - unheard of for an Internet stock. Of course, this P/E came about as a result of the one-time sale of GeoCities, not as the result of sales. But this is precisely what the CMGI model is all about - sales are largely irrelevant for CMGI, and I expect a continuous stream of spin-off IPOs and stock swaps, as their strategy comes to fruition. $4/share realized from ONE of their properties, and they have dozens more.
So, despite the 100X+ increase over the past two years (you could have bought CMGI for less than $1/share, split-adjusted, two years ago...) I think it's got a long way to go yet over the next 2-5 years.
SUNW and CSCO, I feel, are ideally-positioned as the Internet continues to explode. the ole pick-axe theory... I will be watching the upcoming earnings figures, though, to confirm that my suspicion is correct that they are taking business from their rivals, rather than a general slump in the server and router businesses.
I am interested in buying LEAPS on these stocks, and then 'CC' the LEAPS with shorter-term options. (My account is approved for spreads, so I will be able to do this.) Obviously, I will be more concerned about being called-away than I would be were I holding stock, because it won't be as simple as simply buying the stock back if I am called-away. I would think I may want to sell higher-strike calls than one normally would when holding the stock. |
