URI

Question

I just purchased 50 contracts of the

URI Jan 20 2017 80 Call @ 15.30, for a total investment of $76,500. In my self-directed 401k.

I know this company well and despite the 'headwinds' faced, it's a cash-machine and has beaten earnings time and time again. I believe this is a level of support and really a buy of a lifetime.

For the people unfamiliar with options, 1 contract = 100 shares. I use options so that I can control 5000 shares (50 contracts) of the stock for $76,500, when it would otherwise cost (5000)(80)=$400,000 to purchase that much stock.

It's a long term option, or LEAP, so the spread is a little bit wider than normal but I think the value is there. They are the largest equipment rental company in the world. Also, I believe there may be some M&A action to add to their bottom line as they have an exorbitant amount of cash.

Also, FYI I bought these essentially 'at the money', which means that the stock was at or around $80/share and my strike price is $80/.share... (I actually bought them when the stock was around $79/share early this afternoon) I did this because I believe the $80 level is strong support for this stock. I also put a smaller amount, $5000, into a LEAP with strike price $100, but that's not important and a smaller play.

Good Luck all

pederson16 · Answer

I just purchased 50 contracts of the

URI Jan 20 2017 80 Call @ 15.30, for a total investment of $76,500. In my self-directed 401k.

I know this company well and despite the 'headwinds' faced, it's a cash-machine and has beaten earnings time and time again. I believe this is a level of support and really a buy of a lifetime.

For the people unfamiliar with options, 1 contract = 100 shares. I use options so that I can control 5000 shares (50 contracts) of the stock for $76,500, when it would otherwise cost (5000)(80)=$400,000 to purchase that much stock.

It's a long term option, or LEAP, so the spread is a little bit wider than normal but I think the value is there. They are the largest equipment rental company in the world. Also, I believe there may be some M&A action to add to their bottom line as they have an exorbitant amount of cash.

Also, FYI I bought these essentially 'at the money', which means that the stock was at or around $80/share and my strike price is $80/.share... (I actually bought them when the stock was around $79/share early this afternoon) I did this because I believe the $80 level is strong support for this stock. I also put a smaller amount, $5000, into a LEAP with strike price $100, but that's not important and a smaller play.

Good Luck all

pederson16 · Answer

also, note: 90% institutional ownership...always a good sign when evaluating companies.I&#x27;ll keep you updated on the trade if/when I can and if/when I close the position.

wallstreetcappers · Answer

At the money leaps are usually not the best use of money like this.

For the ammt you spent, wouldnt you want to reduce the ammt of premium in those calls to pay the least you could and have more intrinsic price for the leap?

If I were spending 70k for leap options I would have bought down to the 60s and drastically reduced my option premium, and in doing so if the stock goes down more, the ITM leap actually holds up better since the closer to the strike the more the MM builds premium into the contract...so you lose less if the market drops. In your case since it is ATM you will lose more of that 75k if the stock drops vs buying ITM leaps. It does cap your upside but in a 401k spending what you said I would want to protect my money more than worrying about limiting my upside.

Also, I know there are firm rules about what can be invested in a 401k, even self directed..what firm would let you buy call options in a self directed 401k acct?

Thats crazy stuff...

pederson16 · Answer

TD Ameritrades 401k. Great west retirement services is the administrator. There is a managed, self directed with their selection of funds, and a self directed where you can buy anything except OTC stocks.

pederson16 · Answer

Worked for TD for 5 years as financial consultant. Have my own company now but left this there because, as you mentioned, I don&#x27;t know any other company that allows this type of investing in a 401k.

pederson16 · Answer

As far as your question is concerned, it's actually more expensive, as you know, to buy ITM options than OTM ones. Now, obviously I bought just barely out, and now it's in with this bounce today, however this is actually as conservative as I'll get. This is less than 25% of my self directed portion of my 401k, and while that is a lot, I feel as confident as I can regarding the state of the market (being a buying opportunity) and in particular this company, an industry leader, growth company, with a pile of cash. I really believe it'll pop back to $100 level by Jan '16, maybe sooner, but wanted to err on the side of caution should an unforeseen market event occur that did give us a correction.
Plus, as I mentioned in first post, I bought at this strike price because I saw confirmed support near here and posited that URI, and the market, would bounce here. I also saw support for the SandP here.
IF it makes it to the level I believe by Jan, think or swims model shows that I should receive around a 150-200% return and if that should happen, I will sell.
My "goal" for this trade is 200% or a 150k gain.

wallstreetcappers · Answer

Well you know think or swim is a marketing tool only, a backwards testing old data resource..not a real predictor of the future.I looked at a 5 yr chart it had me quite nervous for you. This stock was under 30 bucks just 4 yrs ago and a longer term chart shows support in the 50 range if the market gets rough.It also looks like a serious head and shoulders failure recently, I hope the market holds in there for you because that chart looks really crazy.

pederson16 · Answer

well, I don&#x27;t ask it for my fortune....I simply see an option I like and view what the price &#x27;could&#x27; appreciate to if the share price increases X amount.And as far as technical analysis and charting is concerned, it&#x27;s pretty much all B.S., similar to statistics....you give me a data set and I&#x27;ll make it look a certain way...i.e. you give me a chart and I&#x27;ll tell you a pattern it just created to go up/down...the ONLY reason I use levels of support/resistance is because that is usually the only share price level that you can actually glean useful information from.  That can of course be considered technical analysis, however in my mind price levels of support and resistance are more fundamental because it gives you an indication of typically where a company is over/under-valued.regardless of all of this and the differences in how you and I evaluate getting into or out of a position, we shall see how the market plays out.I believe Greece will get a deal. And if not, who cares? They make up less than 0.5% of the Euro economy.I believe Puerto Rico.....well....who cares.I believe the FED will NOT raise rates.I believe this China slowdown is overplayed.etc.etc.etc.And most importantly I believe URI will report continued good earnings/revenue and have a solid outlook and continue industry dominance.  How that relates to the share price? Who knows?  We are all just guessing any way.good luck

pederson16 · Answer

this has obviously dropped to a 52 week low.... my timing in buying the calls was pretty good (if this bounces and bottoms here) but obviously you can't be perfect.

earnings after the close tomorrow, Wednesday, and the conference call is thursday morning.

looking for a beat on EPS and revenue and a good, positive call.

I think the CEO makes up for his lackluster comments a couple months ago which made the stock start a drop based on "soft" sales figures.

Only 10% of their business is exposed to oil/gas, so I think that issue is way overplayed, considering URI has basically been trading with OIL $.

It's trading at a 14 PE and not even 10x forward earnings for a business growing at a 18-20% clip y-o-y. Crazy low valuation.

I'm sticking hard to my guns here, looking for a positive reaction to the earnings and hopefully a good couple days in the market to follow.

G'luck to all

pederson16 · Answer

big beat on revenue, little light on EPS, cut outlook, but YoY free cash and all #'s up significantly.

oil and gas drop in price and lack of drilling hurt them more than expected.

due to that, cut outlook, so of course it drops 5%. Great time to get in for a swing trade or any timeframe. I wasn't expecting the oil and gas to hurt them much so hindsight I could/should have waited but if they beat across the board like that and didn't lower outlook they probably move up .

It is what it is, and that's why I buy LEAPs so that I still have 1.5 years for the stock to make it up. Still confident. Boone Pickens and some other "oil men" forecasting for oil to come back to $70 level. Boy, I hope they are right. That would in turn help tremendously as this seems highly correlated to the oil trade.

Also, company announced, in addition to the $750MM buyback, a new $1BB buyback. That will also help to buoy and possibly bolster the stock price.

All in all, could be better of course, but also could be worse. I'll probably be down 33% on my calls when market opens tomorrow but I'll hold firm on that position as I am still very confident it becomes a winning trade. I may also buy the underlying to grab a position on this drop and try to find the bottom..

g'luck all

wallstreetcappers · Answer

Yeah I read the release..I didnt see it so rosy as you did. Their EPS beat was from sales of assets, the bigger issue was their forward forecasts..that is why the stock is dropping. They expect slower sales in all areas of their business.When they resort to tossing out more debt ridden stock buybacks as a means to slow the decline due to lowered guidance I am not impressed with that at all.Why given their margins are they spending and adding debt to buy stock back? I hate these gimmicks and it will come back to bite many companies when they need the money for expansion or reinvestment and have spent it and now are more levered, then the future debt markets will not be so kind and rates not so good.To me a company would be smarter to take on debt and save the cash for CAPEX or acquisitions, not stock buybacks and dividends.

wallstreetcappers · Answer

So do you have powder to buy down or lower your basis?Those options are at 6 bucks now, and it looks like the 50&#x27;s are in the cards unless something reverses quickly.

pederson16 · Answer

just dollar-cost averaged down and got some just above $6.

there's a long way to go before expiration. still feel good after listening to conference call and all my due diligence.

just bad timing on my part. no defense for that.

Also, bought 500 shares at $63. should have sold puts at that level or below as premiums were through the roof. but didn't want to miss the drop.

we shall see where it goes.

CrusCrnshw · Answer

My head is spinning reading this

URI

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