Angry Billionaire Implodes! (PFE,USO)
Many have asked us over the years to summarize in our own pithy way the true meaning of life and to mince no words in doing so.
But as we’re not yet accredited philosophers, we here at Normandy prefer to limit our ruminations to subjects we’re familiar with. And that means money, brother – its acquisition and, at times, its loss.
So, in an effort to please the many who took pains to contact us on the matter, we hereunder offer the following, limited piece of useable wisdom. Please commit it to memory –
The transience of affluence is caused by 1) an overabundance of opulence, and 2) a lack of proper vigilance that leads to 3) arrogance, decadence, corpulence and the inevitable call for an ambulance.
We call it …
To put a slightly more serious spin on it, money will come and money will go, friends, and everything – absolutely everything – depends on the trait of pride.
That is to say, it is the quality of arrogance – or, more accurately, what the ancient Greeks referred to as ‘hubris’ – that marks the beginning of the end of a man, his fortune, his health, his family and his happiness.
For a humble man is a contented man, while the arrogant one is ever angry.
And you’ll find, too, that among the best traders in the business, the ability to admit a wrong decision and correct it immediately, and to avoid any emotion whatsoever in the process, let alone anger, is the sine qua non of those most successful.
A recent article from Britain’s Daily Mail serves up the additional health benefits of avoiding anger (again, a byproduct of arrogance), and it’s worth the three minutes it takes to read it. But our interest, of course, comes from the stock side.
Consider – at a time when anger is leading a great many to do things they would never have dreamed of in an earlier era, we also see the rise of prescription drugs designed specifically to combat that emotion.
Companies like Eli Lilly, Pfizer, Glaxo SmithKline and Forest labs, among others, have cashed in handsomely with products that sport alien sounding names like Zoloft, Xanax, Prozac, Celexa and Effexor, all of which claim the upper hand in dealing with stress and anger management issues.
The stock we like best also sports the popular Advil brand of ibuprofen, which, according to the above mentioned Daily Mail article, has proven itself an effective treatment for the chronic tension headaches that disproportionately strike angry people.
The company, as you may already have guessed is Pfizer Inc. (NYSE:PFE), better known to many as the producer of the excitable VIAGRA product for troubled members of the pants club.
We’ll be right back to flesh out our Pfizer trade after this quick word about a prior initiative that requires your attention.
The trade was launched on the 31st of October in a letter called Let’s Have an Oil Chat. There, we prompted you to sell the USO July 20th 10 PUT for $0.52 and use the proceeds to purchase the USO July 20th 12 CALL for $0.53. Total debit on the affair was a penny.
Today, the PUT trades at $0.35 and the CALL for $0.79, and we say it’s enough. Buy back the former and sell the latter and you walk away with $0.44 on a penny expended. That’s a total take of 4300% in four weeks, bud, and you’re a free-form genius if you loaded up big on this one (like our good friend Hibbert from Tech!)
Way to go, fellas!
Back to this week’s ‘Rage’ trade
We’re going to kick off with a simple chart that offers some background on the pharmaceutical sector and shows you Pfizer’s place within it.
XPH is the NYSE traded SPDR S&P Pharmaceuticals ETF, a reasonable proxy for the biggest names in the business based as it is on the S&P Pharmaceuticals Select Industry Index. And as you can see, Pfizer has managed to outdo the sector by a huge margin over the last 30 months.
Much of that outperformance has to do with the company’s large and growing market share of the ‘anger corner’ of the drug market.
Pfizer takes to the ‘anger’ playing field with four distinct brands, XANAX, EFFEXOR, ZOLOFT and NEUTRONIN, some of the industry’s biggest sellers. And while these are decidedly not among the company’s best selling products, they are fast contributing to a larger share of the firm’s bottom line.
Pfizer is taking a larger share in the world’s largest markets for psychiatric drugs.
Below, we offer a long term look at the company’s stock price, beginning with the death throes of the Lehman Bros. meltdown of 2008.
And as you’ll see, the chart shows a strong growth trajectory for nearly seven full years, after which there was a stall and a dipsy-doodle, sideways slide through ‘til today.
Have a look –
Since late 2013, Pfizer shares have moved in a tight band between $28 and $36. After an overbought RSI 80 print early in that year, the company’s shares labored to work off the froth and now appear ready to resume their rise.
Technically, the stock is above all her weekly moving averages, all of which are unfurled and trending higher. Neither RSI nor MACD indications are excessive (in green), and perhaps most importantly, a pennant pattern eighteen months in the making is now nearing completion (in red).
A break above the upper edge of the pennant at $36.50 would lead to a cascade of technical buying, while any move to the lower band at roughly $33.25 should trigger a supportive bid.
And that’s precisely how we’re playing the trade.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
Wall Street Elite recommends you consider selling five (5) PFE June 15th 33 PUTs for $0.81 each and buying two (2) PFE January (2019) 37 CALLs for $1.68. Total credit on the trade is $0.69.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
With kind regards,
Hugh L. O’Haynew