CDW Actually Beats

Exit Remaining Half of Puts

By Bryan Bottarelli
Wednesday, July 19, 2006 10:35 AM EST
Wed, 19 Jul 2006 15:35:00 GMT

Dear Bottarelli Research Member,

In a day chalked full of earnings news, the overall sentiment has resulted in a 100-point gain on the Dow — sparked by positive earnings news from Dow heavyweights J.P. Morgan Chase and IBM. Over on the NASDAQ, we’re seeing a strong 20-point jump — which is impressive when you consider that tech leader Yahoo is down 17% after they fell short of analyst expectations.

Unlike Yahoo, the NASDAQ is embracing the earnings announcement from CDW (CDWC – NASDAQ), who reported a 9% jump in profits. Before the bell, CDW reported earnings of $0. 91 per share — beating Wall Street’s $0.79 estimate by $0.12. As I mentioned in this week’s alert, I wouldn’t be surprised if CDW reported strong earnings — but it was the company’s profit forecast that would be the most important. Even if CDW beat estimates, I suggested, subsequently lowering their guidance within this weak tech environment would have dropped shares. Unfortunately, that didn’t happen.

In a somewhat smokescreen move, CDW management did not raise or lower further guidance, which kept Wall Street’s focus on their current earnings. This has pushed shares of CDWC up $5.59, subsequently stopping us out on the remaining half of our August 50 Puts (DWQ TJ).Moves like this are why I always think it’s a good idea to take profits on half of any position showing a strong gain on the eve of an earnings announcement, because you never know how a stock will react to earnings news. If you have yet to do so, exit the remaining half of your CDW August 50 Puts (DWQ TJ) at market.

In other news, today’s market pop is a welcome sign for ATK, ABX, and CELG, as each position can hopefully regain some of the momentum they lost during the Middle East sell-off. Over on the put side, it’s a good idea to remain positioned in weak stocks like MEDI and MDT, as you never know when the markets will turn south again. Of particular importance to MDT today was the earnings news from St. Jude Medical. Although they reported a strong 40% jump in second-quarter net profit, the medical-device maker also lowered its forecast for the year — saying that data suggests continued weakness in the implantable cardioverter defibrillators (ICD). This is a good reason to remain short MDT via our August 50 Puts (MDT TJ).

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From July 2006