CBOE Stock (Some) Investors Can't Live Without It
This is a Post from the Symbol Surfing Blog from Wed, Sep 12, 2018.
Did you read my post "2 Stocks That Stock Market Investors Can't Live Without"?
If not, please check it out. I think you may like it.
Another Symbol Surfing Website Tour
During a website tour with a fellow investor yesterday, I found a stock that may be set to run.
It is in the same industry as ICE and NDAQ, Institutional Financial Services.
Before I tell you what it is and why I bought today, I want to explain how I found it.
How I Use Symbol Surfing
The website tour I offer is basically my daily stock market research routine.
I start on the Symbol Surfing homepage and check out the new highs, new lows, gainers, losers and earnings and ex-dividends.
There were 38 new highs and 16 new lows yesterday.
Keep in mind Symbol Surfing contains only about 550 stocks, just the components of the major US stock market indexes like the Dow Jones, Nasdaq 100 and S&P 500.
New 52 Week Highs
There is a relatively obvious reason to browse, scan or perhaps "surf" the 52 week highs on a daily basis.
These stocks are currently performing at their best levels for the previous 12 months.
They are obviously doing something right.
Several of the stocks are actually at all-time highs or record highs, which means the stock is performing better than ever.
When I buy stocks at this level, my goal is to buy high and sell higher.
This has worked well for me over the years.
I plan to share my strategy on this in more detail in the future.
New 52 Week Lows
Stocks hitting new 52 week lows are to be avoided, plain and simple.
These stocks are at the lowest level in 12 months.
In some cases, these stocks are at multi-year lows.
One or more bad things are going on at the company.
So it's easy to write these companies off and never think about them again, right?
What about buying low and selling high?
Haven't you seen a company hit new lows only to recover over time and even run all the way back up to the previous highs?
That can be a huge return.
Let's Go Back In Time
A time machine would be great, wouldn't it? Or at least a crystal ball.
Instead, let's "kinda" go back in time.
When I went the 52 week lows list, I used the date select menu.
The date select menu allows you to see the companies that hit 52 week lows on specific dates in the past.
Basically, I select a date and review the stocks for that date.
Then I repeat this process for about 20 to 30 dates.
It is time-consuming but I can't think of a better or faster way to accomplish this.
What I Am Looking For #1 of 7
Unsurprisingly, these stocks may have a negative annual return with a downtrend.
The first thing I am looking for is a 1 year chart that shows the price has started to rebound off of the lows.
This is easy to do just by looking at the chart.
A stock that is moving sideways is not what I am looking for.
By the way, sometimes not buying can be a better decision than buying.
So I am happy to skip a stock that does not fit my criteria.
What I Am Looking For #2 of 7
Once I find a stock that is showing some signs of life, I want to find out why.
What I look at and what I have found to be a powerful indicator is what I refer to as PEM.
PEM stands for Post Earnings Move.
Hey, I love reading earnings call transcripts just as much as the next guy, but what really matters to me is the stock market reaction to the earnings announcement.
This percentage is conveniently in the Earnings Date column like "PEM:-7.29%" or "PEM:+3.37%".
For ease of use, if the move is positive, there is a green background. If the move is negative, there is a red background.
If you type ":+" (no quotes, just the colon and plus sign next to each other) in the search box at the top of the table, you'll see only positive PEM stocks, if available. This works on all of the list pages.
Based on the date of the earnings, I am looking for a small percentage move like 5%.
If the PEM is too small of a percentage, then the earnings may not have been that great.
If the PEM is too high, then the earnings were great but maybe most of the move has already happened for the time being.
What I Am Looking For #3 of 7
I click on the 1 year chart image and click the right arrow key to see the 5 year chart.
This helps me see the bigger picture.
Stocks charts that look like a roller coaster are not what I am looking for.
I am looking for a long steady uptrend with a positive 5 year return.
I also look at both charts to identify support, resistance or any chart patterns.
What I Am Looking For #4 of 7
Then I want to check some basic but very critical fundamentals indicators.
I want to make sure the company has a positive Earnings Per Share (EPS).
In general, would you rather invest in a profitable business or an unprofitable business?
I want to make sure the company has an average or below average Price To Earnings Ratio (PE Ratio).
Lastly, I prefer to buy stocks that pay a dividend of at least 2% or more.
This is not a requirement but it definitely helps out if the stock goes the wrong way a few months.
What I Am Looking For #5 of 7
I scan other stocks in the same industry.
When I visit the industry list, I sort the 1 year chart column.
On each chart is the 1 year percentage return.
What I want to see is if the majority of the stocks are green or positive for the previous 12 months.
If many of the stocks charts are red, it may mean something isn't right industry-wide so I won't jump in.
I look for reasons to invest AND I also look for reasons NOT to invest in a particular stock.
I think that's partly what Peter Lynch meant when he said: "Know what you own, and know why you own it."
What I Am Looking For #6 of 7
I visit the company's website and just browse around.
It's usually very interesting to me to learn about their products and services.
What I Am Looking For #7 of 7
Do I use the company's products or services?
At the minimum, I need to understand what the company actually does.
One test is if I can explain it to someone else.
This Is What I Found
Once, I got to Fri, Aug 10, 2018, which was after about 20 pages of results, I found the stock I was looking for.
It is the Chicago Board Options Exchange (CBOE).
In this case, I actually use options as part of my investing strategy.
I sometimes sell puts on a stock I want to buy and I sometimes sell calls on stocks I already own.
It's not super complex, just complex.
If I can learn how to do it, I am sure you can as well.
If you are interested in options, you might like this article.
Be Like Warren Buffett: Sell Put Options
There are pros and cons to working with options as well as risk.
5 Year Chart
The 5 year return is not only positive, it has a 122% return.
So $5,000 invested 5 years ago would be worth $11,100 today.
I drew a trendline which represents resistance from 2013 to 2016 and support in 2018.
When the stock price broke through resistance, it ran all the way up to a new record high of $138 on Mon, Jan 29, 2018.
This same trendline seems to represent support as the stock bounced off of the recent 52 week low.
1 Year Chart
The black vertical lines are the recent earnings dates.
As you know earnings are very important and the reaction to the earnings announcement is very important as well.
The stock continued its downtrend after each of these earnings dates but has actually moved higher since the most recent earnings announcement.
A positive PEM is a key indicator for me.
Overall, this stock checks out for me.
Of course, there are no guarantees and this stock could move lower or sideways, but I am bullish right now.
So I bought some shares today.
I do already own ICE (New York Stock Exchange) which is in the same industry, but I feel like this is not a direct competitor.
So since not all investors use options, this is a stock some investors can't live without.
What do you think about "CBOE Stock (Some) Investors Can't Live Without It"?
Let me know in the comments section!
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SELECT * FROM `history_cboe_nyse` WHERE `symbol` = 'CBOE' AND `exchange` = 'NYSE' AND `date` = '2018-09-12'