Key Points

References

Stock option lists

st-stock-options-210118-screener_results.xlsx

Key Concepts

Stable companies in unstable times for bull credit put spreads

https://www.fidelity.com/insights/investing-ideas/stocks-tumultuous-times

Verizon VZ
Kimberly-Clark KMB
Hormel Foods HRL
Walmart WMT
Novo Nordisk NVO
Consolidated Edison ED
Walgreens Boot Alliance WBA

ATT

190817 - coming breakout from 35 to 40 ?

https://finance.yahoo.com/news/looks-2-big-catalysts-place-091657707.html

The breakout bull thesis in AT&T stock rests on two big catalysts. The first of those catalysts is the forthcoming widespread roll-out of 5G connectivity.

210209 - ATT unlikely to grow revenues, margins will be under pressure

1. entertainment group will generate profit but remain a poor investment return after COVID
2. wireless losing share on 5G to TMobile so long-term cash flows expected to decline continuously
3. Other areas may have growth but not enough to offset cash flow generation declines in 2 main businesses:  security, business networking services, FirstNet
4. dividend growth may remain relatively flat.  IF cash flows fail greatly, expect future cut down the road if buybacks don't solve problem
5. significant risk for PE compression to levels similar to Verizon leading to greater capital losses

Why might private companies choose a SPAC over an IPO?

https://www.fidelity.com/learning-center/trading-investing/SPACs?ccsource=email_weekly_AT

Due in part to the SPAC voting rule change, and other market forces, SPACs have become an increasingly popular alternative to IPOs. According to a recent Investor Bulletin from the SEC on SPACs, "Certain market participants believe that, through a SPAC transaction, a private company can become a publicly traded company with more certainty as to pricing and control over deal terms as compared to traditional IPOs."

More specifically, some of the reasons a private company might choose to go public via a SPAC versus an IPO include:

• Circumventing the IPO process. An IPO can be time intensive and carry significant costs. A SPAC is already public and, consequently, it can allow a company to quickly access public markets.
• Flexibility of SPACs. Instead of raising funds through an IPO as a private company, a SPAC can be an alternative for those companies that are highly leveraged (i.e., the company has a relatively significant amount of debt as a percentage of its total financing). A highly leveraged company may have difficulty raising funds in an IPO.
• Private company shareholder benefits. Founders and other major shareholders who want to sell some of their ownership position upon going public can sell a higher percentage in a reverse merger than they might be able to with an initial public offering. Also, these founders and shareholders can avoid lock-up periods (a predetermined amount of time that a shareholder cannot sell their shares) that can be associated with an IPO.

An important distinction to note here is the different valuation approaches with SPACs and IPOs. According to the SEC, "Unlike the traditional IPO process, where a private operating company sells its securities in a manner in which the company and its offered securities are valued through market-based price discovery, [SPAC managers] are solely responsible for deciding how to value the private operating company and how much the SPAC will pay for it."

Potential Value Opportunities

Some strong dividend companies

190905

https://seekingalpha.com/article/4287265-goldman-sachs-recommends-10-high-yield-stocks-6-actually-worth-buying-today?li_source=LI&li_medium=liftigniter-widget

But high-yield stocks are also trading at their most undervalued levels relative to low-yield stocks in 40 years. That's a VERY good reason to buy undervalued quality high-yield stocks today.

Of Goldman's 10 picks (T, KSS, ADM, VLO, CFG, ABBV, ETN, STX, SGP, and EVRG) KSS and STX don't make my quality cut-off.

VLO and EVRG are more than 20% overvalued, meaning T, ADM, ABBV, ETN, CFG, and SPG are reasonable to very strong buys today.

There are superior alternatives to T and CFG, including TU, WFC, BNS, TD, and CFR. This means I would personally only recommend buying ADM, ABBV, ETN, and SPG today.

Potential Challenges

Candidate Solutions

Step-by-step guide for Example

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Recommended Next Steps

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