O'K all you PB holders, let's not forget all the
reasons why we bought this stock. Let's not foget all the
articles we read about how well run this company is, how
safe it is (rated one of the top 7 safest global
stocks to own), let's not forget all the projections of
mid 40's to lower 50's, and finally let's not forget
how much we read about the "long term" potential.
Everyone is taking a beating these day, this stock if you
will remember is a great long term play. Keep it, buy
more if you can, but you're crazy to dump it at a
lost. The fundamentals of the company are good, the
peso will bounce back, and things will eventually
settle down. Great long term stock pick!
I agree with the general advice on options, with
some additional commentary.
Option trading on
margin is not intrinsically evil. Like commodities
futures trading, it can be safe and profitable if one
knows what one is doing. However, it should only be
done in a controlled, loss-limiting manner, whereby
one has the luxury of monitoring positions full-time
- as in full-time options traders. I hesitate to
say, only professionals should engage in it, because
many of them simply don't know what they're doing, and
following such leads could be dangerous.
personally do not engage in options (or futures) trading on
margin, nor do I intend to any time soon. Furthermore, I
would not recommend going down this path unless you
first give yourself at least year or two of full-time
trading option/future trading experience first.
I'm not sure how much luck you'll have finding
worthwhile reading on the subject of options outside of
academic and web searches. Much of what I've seen is
fairly pedestrian. Academically speaking, most finance
and accounting text books will give a cursory
overview and usually give some explanation of the
Black-Scholes pricing formula. The pamphlet published by the
AMEX/CBOE that most brokerage firms give out is about the
best single reference I've seen.
mathematically inclined, and have some finance
training/experience there are some decent websites on the
Black-Sholes pricing formula. Spreadsheet users can even
download a fairly useful tool pak that can be added and
used for pricing analysis. If I find the site that I
used, I'll post it, but I remember doing a search in
metacrawler for "Black Scholes formula." I think it was a web
site that some grad student had posted.
theory and math are really not that terribly
complicated. The black magic lies in the various assumptions
and inputs - which are ultimately driven by supply
and demand (of market makers). PB is perhaps a more
extreme example of an issue which diverges widely from
what Black Scholes pricing would predict, especially
based on its most recent volatility.
these facts might lead one to think that there is
opportunity to profit by "options arbitrage" until options
prices for PB are bought to Black-Sholes equilibrium, I
would not encourage this. Options pricing and trading
is still a relatively obscure and arcane practice.
Unfortunately it is still a very small elite, and dare I say
collusive and controlled minority, which exerts a very
strong influence on options prices.
...and all you see is bulls. One bull in
particular who just threw away $6500 on some options with
very high premiums.
The _new_ reality, that
you all need to get used to, is that this company
will, under no circumstances, earn more than $1.60 in
FY1999. Further, if the Peso and SA currencies continue
to fall, then Panamco will have a lot worse problems
than just Venezuela. The co has roughly $50 mil/year
in $ denominated interest payments on its debt -- do
the math and you can see how a small (10-20%) slide
in the currencies where they do business could
easily knock earnings down to $1.00. Nor will the
multiple on these earnings be very high (at least not
anytime within the next 6-12 months), because people will
continue to lack confidence in the currency. So, let's
figure Panamco at 15x our new earnings, which gives us a
12-month price target of $15 - $24. Doesn't sound like a
stock I'd want to buy right away.
Coke is great.
But the fact of the matter is that Brazil's
government can afford to run for only about 45 days without
issuing more short-term debt, and the rate they have to
refinance at could well grow higher and higher (cf.
Why not wait until the stock is at $10-14
to buy it? If it gets there, you've gotten a good
deal. If it doesn't get there, you didn't lose
anything; in fact, you've earned a little interest having
some cash on hand.
P.S. In the beverage sector, look right here at home.
Celestial Seasonings is a strong brand at a fair price,
with good visibility and no currency exposure. I sold
my Lucent Tech at $101 a couple of weeks ago (a 124%
profit :-) and put it into CTEA at $40 this week. The
stock won't go lower than $30 without a serious change
Celestial Seasonings! Are you trying to be funny?
Are you seriously trying to compare a ~100 million
dollar company to a 2.5 billion dollar company? Well
maybe being a smaller company it has better growth
potential...oh, no, not really, according to the analysts. Well
maybe they have a better profit margin...oh no, wrong
again. Well, Coke's a household name and Cestial Seasons
is...hmmm...no...never mind. Well, I'm sure there is some reason you're
pushing the stock...
You're welcome to your
investments, I've been quite pleased with PB since you were
going through puberty. Rest assured, the premium on my
options was a steal. As always, I'm prepared to lose the
premium on any options play. But I wouldn't be buying an
You might want to study up a bit
efore you declare a given call premium is high
(actually, I think you said, "very high"). PB options
typically trade at a significant discount, considering the
stock's volatility. For that time period, a premium twice
that would be common for at-the-money calls on other
stocks with this kind of volatility. But, just in case
you're worried, I've already got a paper gain on the
trade, even at the bid.
So...what's the pricing
like on CTEA's options?. Oh, that's right, it's a
small cap, they don't usually trade
<"this company will, under no circumstances, earn more
than $1.60 in FY1999.">
saying it does not make it so. Nor does your pick of a
15 P/E have any relevance.
Of course PB has a
significant foreign exchange risk! Ummm...doesn't that mean
there is also a significant foreign exchange upside?
You are welcome to assume whatever exchange rates
you'd like and trade based on those. But it sounds like
the risks of international investing are not for you.
Guess the rewards won't be either.
15 P/E? Where
did you dig that number up? Hmmm..what is KO's
P/E?...Oh yeah, close to 50, but then, it doesn't have the
growth PB has, so...wait a minute, that doesn't make any
sense. Well, maybe you're talking about bottlers...but
CCE has an even higher P/E. Well, maybe you're
talking about international bottlers...but, no, KOF
appears to be trading well above that too. Well, I'm sure
you have a good reason for picking 15; I just can't
figure it out.
For what it's worth, PB's growth
is generally estimated to be over 20% next year and
high teens for the next five. Absent abnormal currency
fluctuations, PB can justify a robust P/E based on its growth.
The comments people have been making about demand and
the fundamentals are, unfortunately, highly relevant.
The fact that PB is diversified across Latin America
may mean that it is hit hard by regional and global
concerns. But it also means that it can weather
single-country-specific aberations quite well, given its interests in
Mexico, Columbia, Brazil, Venezuala, Costa Rica,
<"do the math and you can see how
a small (10-20%) slide in the currencies where they
do business could easily knock earnings down to
Actually, you'll have to do that math for me. Even starting
from next year's low estimate and assuming another 20%
currentcy hit, your math doesn't work for me. In fact, your
scenario, even assuming a lowly 15 P/E, is pretty close to
today's price, reinforcing the notion that today's price
is pretty attractive, especially since I can
perceive many more attractive scenarios than the one you
I couldn't care less whether you invest in this
stock or not. And you're more than welcome to short it.
But let's stop with the alarmist, fact-free, and
otherwise misleading postings? And hyping your pet stocks?
Now that's just a bit tacky.