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From Tom Dyson in Palm Beach Current Income: Last week, shares of this company sold off hard after it announced disappointing fourth-quarter earnings results.
By the time the selling pressure subsided, $14.7 billion in market value had vanished.
You can see the carnage in the chart below:
But we disagree with Wall Street. We don’t feel this company is suddenly $14.7 billion less valuable.
It’s a textbook “Wall Street Overreaction”: A great company has a negative “one-time fixable event” or an earnings miss. Wall Street panics and sells off shares. We then seize the opportunity and make a “low-ball offer” (selling put options) to own shares at cheap prices.
This is one of our all-time favorite trading tactics. We’ve executed 15 Wall Street Overreaction trades since launching PBCI. All closed as winners. And we averaged 18% full-cycle annualized returns.
We expect today’s trade to be no different. If the market doesn’t take us up on our low-ball offer, we’ll walk away with a 16.3% annualized return. If it does, we’ll buy shares at a 5.2% discount to an already depressed price… and use our shares to generate even more income.