Examining Warren Buffett’s Portfolio: ConocoPhillips (COP)
Dec 27th 2007
… Financial magnate Warren Buffet owns over 17,500,000 shares of COP, valued at over $1.5 billion, or about 2.34% of his vast portfolio. COP has been a steady gainer over the last 12 months, with oil prices hitting near-record levels in late-November and again in December. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on COP.
After hitting a one-year low of $61.59 in January, the stock hit a one-year high of $90.84 in July. COP opened this morning at $88.92. So far today the stock has hit a low of $88.71 and a high of $89.23. As of 11:15, COP is trading at $88.80, down $0.16 (-0.2%). The chart for COP looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a February bull-put credit spread below the $75 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 4.8% return in just 7 weeks as long as COP is above $75 at February expiration. ConocoPhillips would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
COP hasn’t been below $75 since May and has shown support around $82 recently. This trade could be risky if the price of oil drops off in the coming months, but even if that happens, this position could be protected by the support the stock might find just above $75, where it has bounced three times in the past six months.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in COP.