Philip Morris Int'l (PM) Shows Bearish Technicals But Gets S&P 4 Star Buy Rating

Posted: Monday, November 02, 2009 9:02 AM EDT

Philip Morris International Inc. (NYSE: PM) ended the last trading session at $47.36. So far the stock has hit a 52-week low of $32.04 and 52-week high of $52.35. Philip Morris International stock has been showing support around 45.88 and resistance in the 49.74 range. Technical indicators for the stock are Bearish and S&P gives PM a positive 4 STAR (out of 5) buy rating. PM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 47 covered call (PFY AA) for a net debit in the $45.26 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 4.43% downside protection and a 3.84% assigned return rate for an 18.71% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the PM Jan '11 35 Call (XAB AG) and selling the Jan '10 47 call (PFY AA) for an $11.40 debit. The trade has a 75 day life and would provide 2.03% downside protection and a 5.26% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Philip Morris International has a current annual dividend yield of 4.74%. [ABR-Seven Summits Research]

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