|Corning Stock Should Keep Grinding Higher |
By STEVEN M. SEARS / Barrons March 6, 2014
The shares are a bet on wearable technology; this options trade boosts your return as the stock climbs.
A funny thing keeps happening to Corning : The stock continues to climb even though the company is as appealing to many investors as dinner with an IRS agent.
On Wednesday, the stock (ticker: GLW) rose to a 52-week high of $19.82 in the absence of any real news other than a day-old story about an accelerated share-buyback program.
This stock has been a favorite of the Striking Price since June 2012 when the stock traded around $13 and the company had just announced Willow Glass, an ultrathin, flexible product that bends like plastic. Since then, the stock has advanced some 53% amid widespread investor skepticism.
The stock has advanced despite a consensus view on Wall Street that Corning's dominant display business line, which accounts for about 33% of total fiscal 2013 revenue, was a major drag due to pricing troubles. Everyone already owns a flat-screen TV.
In the options market, where traders express their view of the future, trading patterns indicate expectations that Corning will set higher highs in the stock market.
The most widely owned contract is Corning's January $22 call that expires in 2016. That the May $19 put and May $20 put are the next most widely held positions is evidence that enough skepticism toward Corning's future still exists despite the rally. This is good.
If everyone agreed Corning's stock was the place to be, the stock would probably lose steam. Why? Because investors tend to go all in when they like a stock, and there's no money left to fuel further gains.
If you believe in wearable technology, which Corning's Willow Glass makes possible, it is not too late to still establish a position.
With the stock at $19.65, investors can sell Corning's August $18 put for 68 cents. If the stock dips below $18, investors are obligated to buy the stock or pay top-dollar to buy the put. Investors who want to build a position in the stock can buy the stock and sell the put.
Of course, it is hard to overlook the shadow Corning's display business casts over the company, but the stock keeps grinding higher, and that is a fact that is even harder to ignore.