It is the best of times if you own Texas Instruments, but not-so-great if you own Diebold, which just became Diebold Nixdorf. And while the former is firing on all cylinders, the latter remains a question mark, albeit with a flicker of hope, which makes it worth holding onto for another quarter.

Chip company Texas Instruments’ (NSDQ: TXN) recent earnings and dividend hike have boosted both its shares and options prices. But it looks as though the shares still have some room to grow, so it’s still a good time to buy while the price remains below our buy limit of $75. Shares have risen 10% since I first recommended them in the August issue Breakthrough Tech Profits.

The strength of Texas Instruments lies in its free cash flow (FCF), the money left in the bank after expenses. In its most recent quarter FCF grew 8% year-over-year to $3.9 billion, which it turned into $3.8 billion in stock buybacks and a 32% increase in the company’s quarterly dividend to 50 cents. The better-than-expected results came from steady growth in all of TXN’s business segments, especially in the automotive and industrial segments.

And TXN reported 6% growth in its order book and $3.14 billion of cash and equivalents on its balance sheet.

The future continues to look bright given TXN’s move toward 300 mm circuit wafers, which allow more circuits to be placed on a smaller space and which cost less to make than the more common chip size favored by the industry.

Finally, what makes this stock highly interesting is that the company has been able to deliver excellent results during a period of slow economic growth. So if the economy starts to ramp up, so should profits.

Buy Texas Instruments up to $75.

Diebold Gets a New Start

I am lowering the maximum entry point for Diebold Nixdorf to $26 from $32, but maintaining my overall – if somewhat tempered – bullish expectations for one more quarter given its rapid integration of Europe’s leading ATM manufacturer, Nixdorf.  

Diebold is now officially Diebold Nixdorf (NYSE: DBD) and is the world’s largest ATM maker. In a nutshell: Diebold makes ATMs. Its clients are banks. Banks are shackled by regulations and aren’t spending money these days. As a result DBD sales have been terrible, especially in North America where bank profits have been slim. Nixdorf is an extremely well run company with a huge market share in Europe and elsewhere in the world, which gives Diebold the potential for a quick shift in gears from contraction to growth. The key to this company’s future growth is Nixdorf’s significant market share in self-service kiosks for retail stores. This market remains untapped in the U.S. and still has room to grow in Europe.

So far I have been wrong on the stock. But given the robust performance of Nixdorf and its reportedly rapid incorporation into the DBD fold, better days could be ahead. Even though the bottom line in the most recent quarter was a $97.9 million loss, revenues ($983 million) were well ahead of the same quarter last year. And much of the loss was related to acquisition costs and other one-time charges.

The stock is up 12% from its Nov.4 low, but is still 16% off of the price when we first recommended it on Aug. 19. But if I’m right the shares will rise as investors begin to value the new company and the addition to the business mix from Nixdorf. Also, if President-elect Trump makes good his promise to repeal some banking regulations, banks could start spending again.

The guidance for the next quarter calls for $1.3 billion in revenues and losses between $0.45 and $0.52 cents per share. This gives DBD a chance to beat expectations without having to make money.

Buy Diebold Nixdorf up to $26, down from the prior $32. You can also hedge the position with a DBD February $22.50 straddle.

Diebold February 2017 Straddle

Diebold February 17 2017 $22.50 Put (DBD_170217P0002250): Buy up to $2. Bought 9/23/16 at $1.15; 11/25/16 closing price $1.10.

Diebold Inc. February 2017 $30 Call Option (DBD_170217C0003000): Buy up to $2. Recommended 8/18/2016. Bought 8/19/2016 at $1.40; 11/25/2016 closing price $0.15.  

DBD Straddle Purchase Premium: $2.55. 11/25/16 Straddle Value $1.25.

Dr. Duarte has a position in this options contract.

Portfolio Update

As the end of the year approaches I will be looking to make the portfolio lean and mean in order to be able to fully capitalize from the Trumpcare developments that are certain to start after the inauguration. Here are this week’s changes.

New Positions/Updates

Adjusted Recommendation: Buy Diebold-Nixdorf up to $26. Sell stop $21.

Stocks

Ambarella (NSDQ: AMBA) – Hold; Sell Stop $63. Bought 6/16/16 at $52.77; 11/25/16 closing price $63.31. Dr. Duarte own shares in AMBA.

Airgain (NSDQ: AIRG) Buy up to $17. Recommended 10/20/16. Bought 10/20/16 at $14.15; 11/25/16 close $23.31. Dr. Duarte own shares shares in AIRG. Profits on 50% of position taken on 11/15/16 at 22.69 or 

Cerus Corp. (CERS) – Buy up to $9. This stock was initially recommended 11/16/15. Bought 11/16/15 at $5; 11/25/16 closing price $5.73. Dr. Duarte own shares in CERS.

Diebold Inc. (NYSE: DBD). Buy up to $32; Sell stop $21. Recommended 8/18/2016. Bought 8/19/2016 at $28.05; 11/25/2016 closing price $23.55.  Dr. Duarte own shares in DBD.

Rollins Inc. (ROL) – Buy up to $30; Sell Stop to $28. Bought 2/22/16 at $27.38. 11/25/16 closing price $32.58. Dr. Duarte own shares in ROL.

Seres Therapeutics (MCRB) – Recommended 7/22/23 – HOLD; Sell Stop $7.  Bought 7/22/16 at $33.90; 11/25/16 closing price $10.90. Dr. Duarte own shares in MCRB.

Texas Instruments (TXN) – Recommended 9/12/16. Buy up to $75. Bought 9/12/16 at $67.18; 11/25/16 closing price $74.43. Dr. Duarte own shares in TXN.

Options

ROLL GILD December 2016 option to GILD February 2017 Straddle

Closed- Buy to open Gilead December 2016 $72.50 Call Option (GILD_161216C0007205) up to $5. Bought 10/31/16 at $4.25; 11/15/16 close out price $4.20.

Closed- Buy to open Gilead December 2016 $72.50 Put Option (GILD_161216000C7250) up to $4. Bought 10/31/16 at $2.85; 11/15/16 close out price $0.95.

Initial Straddle Value: $7.10.  Roll over value $5.15.

Buy to open Gilead February 17, 2017 (3^rd week) $77.50 Call (GILD_170217C0007750) up to $6. Bought 11/15/16 at $1.65; 11/25/16 closing price $2.68.

Buy to open Gilead February 17, 2017 (3^rd week) $77.50 Put (GILD_170217P0007750) up to $5. Bought 11/15/16 at $5.15; 11/25/16 closing price $5.02.

United Healthcare (NYSE: UNH) June Straddle

Buy to open United Healthcare June 2017 140 Call Option (UNH_170616C0014000) up to $16. Bought 11/17/16 at $16; 11/25/16 closing price $18.40

Buy to open United Healthcare June 2017 140 Put Option (UNH_170616P0014000) up to $10. Bought 11/17/16 at $5.65; 11/25/16 closing price $5.65.

Initial Straddle Value:  $21.65