BX has been under $5 lately. I’ve been watching it since the IPO in June 2007, and now it’s a penny stock. Forbes magazine had an article a month or two ago that said it was a buy at a little above $5 – of course, when the article was released for print the share price had already gone to $7, and then it traded down to a new low under $5 which both excited me and scared me a bit. What attracts me is the dividend. You’ll earn a return anywhere from ten to fifteen percent just holding it for the dividend even if the share price doesn’t advance. I think it will trade upward but I’m not sure how many months it could take to get a few points out of it.
Heres the objective: capturing a few points within the next six months. Ill make a couple of unlikely set-ups here, such as the hundred thousand is sitting in a Roth IRA account that eliminates tax issues. This hundred thousand may only reflect one part of the overall retirement monies for example, perhaps the other money is invested in an investment grade insurance contract. That way, the person is going to have a guaranteed income for retirement even without the hundred thousand in the Roth IRA. Im generally not agreeable to cheap stocks (you’ll recall my last experiment with RBS failed), much less penny stocks as meaningful investments but here we go anyway:Bought: 20,000 shares at $5
***Update***
As I’m getting back from vacation I notice that BX is trading from $12 to $14. Wow, the share price has more than doubled in only a little over two months! I’m not convinced it has enough momentum to push beyond that in the near term. Sure, that’s just a feeling, so using puts and calls to hedge can still provide an income from this position.
***Update***
At most, all one could have probably got out of this position is roughly ten points from 5 or 6 to 16, but that’s worth twenty percent of our hope of reaching for seven figures. At least this one feels like a satisfying experiment.