Buy Alert: Delphi Automotive (DLPH)

By Jim Pearce • October 26, 2016

TRADE INSTRUCTIONS
Date: October 26, 2016
Name: Delphi Automotive PLC
Symbol: DLPH
Type: Open
Limit: Buy below $65

TRADE TARGETS
Holding Period: 3 months
Target Return: 10.4%
Annualized Return: 41.6%
Stop Loss Level: $56

TRADE RATIONALE

Delphi Automotive PLC, based in the United Kingdom, manufacturers vehicle components and provides electrical, powertrain, and safety technology solutions to the automotive and commercial vehicle markets worldwide. Yes, this is the same Delphi that went through reorganization after the Great Recession nearly wiped out the auto industry seven years ago (remember “cash for clunkers”?), but since relisting in 2009 the company has been consistently profitable.

A quick glance at Delphi’s chart reveals a stock in general decline since China’s economy started to weaken two years ago, but bouncing hard off of its support level near $60 after the release of its quarterly earnings reports that tend to surprise to the upside. And with its next quarterly report schedule to be released on November 2^nd, we think it is due for another bounce towards it resistance level near $72 after next week’s report comes out.

DLPH earns a perfect score of 10 from our IDEAL Stock Rating System, which rates every stock in the S&P 500 according to dividend yield, cash flow and relative valuation based on forward PER. Historically, stocks that score 8 or higher tend to outperform the overall stock market during the ensuing 3 – 6 months, usually sparked by a positive earnings report and/or forward looking guidance.

NOTE: Although we do not offer specific options advice, unlike some of our other holdings DLPH is optionable so buying a call option slightly in or near-the-money is another way to play this trade (and if you don’t know what any of that means, please ignore this section altogether). For those of you who are experienced with options, feel free to share your insights regarding DLPH on the Stock Talk board at the bottom of this page. Thank you.

Stock Talk

Comments Oldest First

Comments Guidelines

Janis Bell

10/26/16 ‐ 8:43am ET October 26, 2016 at 8:43am ET

Hi Jim, These alerts are not coming to me by text (although I signed up — they won’t send texts overseas and I am overseas another 10 days) NOR by email. I just happened to log on today, but I don’t want to have to remember to do so every day. What’s the solution?

Jim Pearce

10/26/16 ‐ 8:45am ET October 26, 2016 at 8:45am ET

I don’t know why you aren’t getting the mail alerts, so I’ll ask my customer service manager to look into it. But we are not able to send texts overseas, so unfortunately I can’t do anything about that until you back to the states. Sorry about that.

Gompps

10/26/16 ‐ 9:35am ET October 26, 2016 at 9:35am ET

Were you thinking of November, December, or the February call options?

black arrow

10/26/16 ‐ 9:56am ET October 26, 2016 at 9:56am ET

Hi Gompps,
If we just took into consideration seasonality I guess we would go with Nov.
http://stockcharts.com/freecharts/seasonality.php?symbol=dlph
I have to go but I was looking at an option chain the 60 call is ITM, but I have not looked at it to much since I have to go and is in-the-money. Hope you are too
Best Wishes!

Gompps

10/26/16 ‐ 10:01am ET October 26, 2016 at 10:01am ET

Thanks! Based on that chart it also looks like February is a good month though.

Larry Johnson

10/26/16 ‐ 10:28am ET October 26, 2016 at 10:28am ET

Gompps,
I did three Feb 17 $70 Calls @ $1.50 each.
Could have bought closer to the money for more money, but most of the call activity is around the $70 one. We shall see how this goes.

black arrow

10/26/16 ‐ 11:41am ET October 26, 2016 at 11:41am ET

Hi Larry and Gompps,
In my reg acct I bt a FEB 17 2017 62.5 call
Yes Feb actually looks better as far as seasonality goes.
Good idea Larry you smooth talker :^)

black arrow

10/26/16 ‐ 9:48am ET October 26, 2016 at 9:48am ET

Hi Jim,
I bt at 63.37 I have pointed out on a few occasions to use a time frame shorter than one day when entering because it allows you to see things you don’t see on a daily chart so here is a concrete example: http://schrts.co/BYK2yz Also I mentioned to wait for 3 time periods to pass before you jump in this would have been 30 minutes in this case – whoops I could have gotten a lower price.
Thanks for a new position Jim

the phantom

10/26/16 ‐ 10:17am ET October 26, 2016 at 10:17am ET

got my first text alert at 8:45 for DLPH, the system is working, got in at 63, will set my target gain price at 10.4% above 63. Thanks Jim

Maria R

10/26/16 ‐ 10:46am ET October 26, 2016 at 10:46am ET

why not sell delph puts that is in the money strike price $65?
thanks for your input

black arrow

10/26/16 ‐ 11:45am ET October 26, 2016 at 11:45am ET

Hi Maria,
You don’t say if it would be a covered Put or a naked Put?
One potential risk on selling a Put is if you should get exercised your broker will want you to deposit NEW Moolah to tune of your put purchase into your account. It is done often but you should be aware of that. It could be better to sell a vertical put spread then you are more protected on downside. In that case as you likely know, you buy 1 “leg” and sell One “leg”.
Best Wishes

Maria R

10/26/16 ‐ 12:26pm ET October 26, 2016 at 12:26pm ET

Thanks, Black Arrow.
I meant a naked put with exp date Nov., as I intend to buy the stock as per recommendation Since I would trade this in a tax deferred account, it will be a cash secured put, which limits any temptation to blow my margin aka greed 🙂
More thoughts?

black arrow

10/26/16 ‐ 2:00pm ET October 26, 2016 at 2:00pm ET

Maria,
I was just hoping you were not doing something that might turn out negative – and now I see no worries – good for you. Time to start some prep in the kitchen.
Cheers

Maria R

10/26/16 ‐ 12:28pm ET October 26, 2016 at 12:28pm ET

It is a good idea to do spreads but I am not not sure how to roll, unlike Jim F.

black arrow

10/26/16 ‐ 1:54pm ET October 26, 2016 at 1:54pm ET

Maria have you ever looked at Tasty Trade and its associated site Dough?
We can learn a lot on Options from them – Free as well. I enjoy ideas from Tom Preston one of the original founders who is always humorous and gives trade suggestions that er good in options.

Rolling is easy on many sites like I use TD ameritrade and the TOS platform.
However I would not consider myself as the person to tell you what to roll to which would work for you

Maria R

10/26/16 ‐ 2:10pm ET October 26, 2016 at 2:10pm ET

Black arrow:Thanks. I really appreciate the education. Thank you for demystifying rolls.

Maria R

11/10/16 ‐ 10:49am ET November 10, 2016 at 10:49am ET

Hi Black Arrow
Today I did my first put spread on BKE. But I had to do it in a taxable account.
Thanks for the advice and encouragement

black arrow

11/10/16 ‐ 10:56am ET November 10, 2016 at 10:56am ET

Hi Maria,
Thats a big step and I hope it works out for you.
The good thing about a spread is it lowers risk.

Abhijit D

10/28/16 ‐ 5:17pm ET October 28, 2016 at 5:17pm ET

Hi Jim – For some reason, i did not receive this alert even in my email or phone. I called support to find out that my phone was not in the system (I had actually replied to the recent email that came in to add phone numbers for text). It is good that Delphi is still a buy as it is under the limit.

Now, you had mentioned, that you would recommend that a member takes position in all the open trades. I missed Valero and Kors and have only 1 open position in LMAT. Realistically, what is a total open $ figure portfolio that you would recommend each member should have. 25K, 50K .. I understand there would be no boundaries 🙂 but i like how this system is working and would definitely want to get engaged in it more.

Jim Pearce

10/29/16 ‐ 8:59am ET October 29, 2016 at 8:59am ET

As a publisher we are prohibited from giving personalized advice, but generally speaking we recommend putting 5 – 10% of your total SW account value in each new position so you are properly diversified. We anticipate having 10 – 20 open positions by the end of this year, so you need to able to spread your money around all of them.

Roger Hill

11/01/16 ‐ 5:36pm ET November 1, 2016 at 5:36pm ET

Hi Jim,
I’ve been with SW for a month now and because I’m also a subscriber to VT I have been buying Call options in response to the SW buy trade alerts. In your Note regarding options you recommend slightly ITM or near-the-money strike prices. My inclination, so far, has been to use strike prices that are deep ITM. This requires more margin but I thought that the returns would be higher with this strategy. I’m new at this so I’m not sure that that’s correct.

Here are the options I’ve bought and the expected return (not annualized) if the SW target prices are met at expiration:
BMA161118C70 for $8.70 -> 65.5% return @ the target price of $84.4 (ex fees)
KORS170120C40 for $7.50 -> 95.7% @ $54.68
VLO170120C52.5 for $4.65 -> 138.7% @ $63.60
DLPH170217C60 for $7 -> 67.9% @ $71.75
LMAT170317C17.5 for $5 -> 54% @ 25.20
There will be, of course, some reduction in these returns if SW decides to get out of the position before expiration.

Thanks for your advice on the stocks and any advice you might have regarding the option trades.

Jim Pearce

11/02/16 ‐ 8:45am ET November 2, 2016 at 8:45am ET

Hi Roger. I would defer to Jim Fink on evaluating your specific positions, since he is the “options master” here at Investing Daily. That said, I think it is up to each investor to determine how much risk they are willing to take when deciding how far into the money to go on these call options, since the further in the money you begin, the lower the ROI if it pays off. I am managing Systematic Wealth under the assumption that most subscribers have a high tolerance for risk, which is why I suggested buying calls near or slightly ITM since the ROI on those could be huge if I am right (or zero, if I am wrong). But what you are doing is perfectly fine, and will still produce a very nice ROI if we achieve my target return. Thank you.

black arrow

11/02/16 ‐ 10:11am ET November 2, 2016 at 10:11am ET

Hi Roger Welcome aboard, I have seen your name in VT.
You were mentioning Options: I was just looking things over In DELPH I bt the Feb17 62.5 call and noticed a short while ago it is up 26.36%. Where in my IRA the stock is up 5.3%, but as we know in Options the numbers are quite different since the amount ids different to name one thing. I notice Jim Pearces reply to you, about risk I put myself in the camp with High Risk Tolerance.
Best Wishes for your continued success in Systematic Wealth Roger. I do think Mr. Pierce has reduced a lot of risk for us in applying his system – thanks Jim

Roger Hill

11/02/16 ‐ 1:19pm ET November 2, 2016 at 1:19pm ET

Thanks, black arrow,
I wish you much success with your SW and VT investments as well.
I’m really hoping that the AI tools that Jim Pearce is using will give us a leg up on bullish stock calls.
I just noticed that at $67.5 the DLPH170217C60 is up 31.5%. (ex fees).

black arrow

11/07/16 ‐ 4:59pm ET November 7, 2016 at 4:59pm ET

Hi Roger,
Today while I kept on to my stock position in my IRA I decided to sell my DLPH
FEB 17 2017 62.50 Call. it was up 47.63% I got in at 5.50 and sold at 8.12.
One of my frequent attempts at humor is “my only regret is I didn’t have more contracts.”
I don’t know how we would correlate the % an option is up vs the % a stock is up; but I do know this I was pleased with the profit in a short time besides!

Looking fwd to having election in the rear view mirror, its been a challenging past year.
Cheers

Roger Hill

11/07/16 ‐ 6:14pm ET November 7, 2016 at 6:14pm ET

Hi black arrow,
The Feb 17 2017 60.0 Call is up about the same today: 47.9%. (10.35/7.0). I understand the attraction of “a bird in hand” but I think I’ll wait until we get closer to the SW target price of $71.75, or Jim pulls the plug on DLPH, before closing out..

A challenging past year indeed. I just hope for more rational times ahead.

Regards,

black arrow

11/07/16 ‐ 8:09pm ET November 7, 2016 at 8:09pm ET

Roger,
Its always good to see another perspective. I am definitely waiting on the actual stock. I was just looking at my chart which shows a cup and since it is a Bullish Continuation pattern – patience should pay off. As Art Hill from stock charts says it should continue to rise untiwe see evidence that is contrary the evidence is all positive to me.
regards,

black arrow

11/03/16 ‐ 11:04am ET November 3, 2016 at 11:04am ET

Delphi is right now showing us a trend line breakout to the upside from an ascending triangle :^)
This is a good thing for those of us with a position!

Benyeh

11/21/16 ‐ 10:01am ET November 21, 2016 at 10:01am ET

Hi Jim,

I bought a CALL for DLPH at strike price 62.5 with premium $3.1. This CALL options will expires on Dec 16, 2016.
Now DLPH price is above $68.5. Could you advise me when should I can close this CALL?

Thank you

Ben

Jim Pearce

12/07/16 ‐ 4:08pm ET December 7, 2016 at 4:08pm ET

Hi Ben. I cannot give you specific buy/sell options prices since as a publisher we are prohibited from providing personalized advice, but I’m sure a couple of your fellow subscribers would be happy to do so. Where are you, Black Arrow? 🙂

Larry Johnson

12/07/16 ‐ 6:13pm ET December 7, 2016 at 6:13pm ET

Ben,
IF you’re still holding that call, personally, I’d sell it at tomorrow’s opening for sure. It’s well into the money and fixing to expire very, very soon: 12/16 . I’m seeing it worth $5.97 on my screen. (5.97-3.1)/3.1 = 92.6% gain (less commissions). Not too awful bad, but don’t let it expire. Either sell it for the cash, or exercise the option itself if you would rather hold onto the stock. IF you exercise, you’ll be buying a 100 shares of DLPH for $62.50/share.
Hope this helps ya.
LJ

black arrow

12/07/16 ‐ 6:22pm ET December 7, 2016 at 6:22pm ET

Hi Larry,
You must be right, we must have something in common. I think theres a good chance you are more clever than me though.
You gave him great advice as well as choices. Its supposed to be relatively short term right so take the $$$
Good going both of you guys

Benyeh

12/08/16 ‐ 9:13am ET December 8, 2016 at 9:13am ET

Hi Black,

If I keep my CALL options until it expires, will I be forced to buy a 100 shares of DLPH for $62.50/share? The CALL OPTION is well into the money now, can I choose not to excise it while it expires at December 16?

Ben

Larry Johnson

12/08/16 ‐ 1:21pm ET December 8, 2016 at 1:21pm ET

Ben,
I think if you hold it till expiration, it will just expire worthless.
On a Call, It gives you the right, but not the obligation, to buy to stock.
LJ

black arrow

12/07/16 ‐ 6:19pm ET December 7, 2016 at 6:19pm ET

Hi Benyeh,
And sorry Jim did not notice this earlier. If you still have sell and take the moolah off the table – Larry would approve. About a week ago on Tasty trade they were talking about their favorite number of days to expiration. Its about 49; they think the ideal time for maximum return without getting burned happens at 21 days out – hope that helps in general.
keep rain in the moolah

Benyeh

12/07/16 ‐ 6:33pm ET December 7, 2016 at 6:33pm ET

Hi Black and Larry,

Thanks a lot for advisement.
I will close my CALL options soon.

Ben

black arrow

12/07/16 ‐ 7:12pm ET December 7, 2016 at 7:12pm ET

Snooze ya loose

Larry Johnson

12/07/16 ‐ 2:16pm ET December 7, 2016 at 2:16pm ET

With the big run up today, I went ahead and closed out my five FEB 17 $70 Calls at $4.40/each.
Again, probably too soon, but I content with the gain on my investment.
(4.40-1.50)/1.50 = 193%
Thank you, Jim Pearce!!!! IF I were a woman, I’d hug and kiss ya…..LOL

Jim Pearce

12/07/16 ‐ 4:16pm ET December 7, 2016 at 4:16pm ET

Thank you. And don’t be so presumptuous; at my age, I take affection from anywhere I can get it! 🙂

black arrow

12/07/16 ‐ 6:08pm ET December 7, 2016 at 6:08pm ET

Way to go Larry! I had another trade I was very happy with, but not a system wealth maybe I can mention it in.
I like it when you win
Cheers

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