My Three Picks for the Fall

Hi, I don't know if anyone is reading my blog anymore. If you are, I am sorry I couldn't post more often. But such is the case of an aspiring full time trader and a full time medical practice...sigh.

But I would like to put on record my three picks for the fall. My so called "Triple Play" and the rationale and where I expect the price to end up. As you all know, I trade options and this time around is no different. I am a high risk high reward type of trader and I like the odds of the "triple play".

My theory is to trade around earnings or events. In this case, I have selected Google, Under Armour, and Cisco to round out my triple play. The commonality is that these stocks, with the exception of Cisco is a fast mover that can move one way or the other rather quickly and violently.

1) Google: I have been long the November call options, pushing out from $590's to the current $650's. I have been long this stock since $545. Despite what you hear in the media regarding issues of how expensive Google is, when you consider its PEG ratio of just under 1.2, it is cheap. I believe the recent run up from its lows near $477 to the current $620.11 is not manipulation. It is valuation catching up to the intrinsic fair value of the stock. In that matter, it still has a bit to go with fair value being calculated to be $777 (no pun intended). Google should command a PEG of at least 1.5 but after earnings, I expect it to go to at least 1.3. Google, is a value play that has some ground to make up. I anticipate that it will hit at least $650 after earnings but may be able to hit $720. I am hedged with 200 contracts of October $620 puts to protect my downside.

2) Under Armour (UA): Go ahead, say what you like about UA. But truth is the retracement to the $60's from the $73 peak after last quarter's earnings really has left this stock in a good position for a robust move. Several things that are going against this stock, and I believe it is wrong, are that it is too expensive at PEG of 2.5, that retail is affected by the credit crunch, and the anemic price movement lately. But when you dig deeply, UA is in the seasonally strong quarter with many avenues to improve margins and sales. Additionally, UA is not a fad but gaining ground quickly on Nike. There is so much pessimism surrounding this stock that most of it is unjustified. Recent downgrade by UBS on weather concerns are nothing but laughable and ridiculous. With the short % above 25% of the float, if they can exceed earnings, we will be able to see at least $78 and possibly $88.

3) Cisco: One word. Weak dollar. With its robust exposure to the outside of USA market place and the world wide expansion of web content, this stock is poised to break out of the $33 range and finally make the transition to the $37 range by the end of the year. The earnings on November 6th will give credence to my theory.

Markets are getting choppy but who would expect anything less when we have virtually gone straight up since the August 25 break out? I think today's pull back is healthy and mostly related to the options expiration manipulation issues than the fundamental break down. The credit worries are nothing new and just presents a new found appreciation for the wall of worry. Is our market perfect? No. They never are, but it would be foolish to fight trend tooth and nail, lest you get toothless. But please protect and respect your capital with some hedging, just in case. You never know.