Why UBS Sees Coach, Hess, PayPal, Yahoo Going Higher Soon

Investing

Published: May 19, 2016 11:05 am

Last Updated: January 13, 2020 7:50 am

When markets get pricey, or just appears to be in a trading range, there are many tricks that professional investors use to take advantage of the situation. We seem to be in one of those periods now, as the market printed all-time highs last summer and we have yet to get back to those levels in almost a year essentially trading sideways, with a couple of big sell-offs thrown in. This is the perfect time for the pros to whip out their arsenal of derivative tricks.

One way the pros take advantage of sideways moves is to do what is called overwriting calls. Instead of writing just the number of calls on the shares you own you may sell twice as many. The logic is you take in the call option premium and the contracts expire worthless as the underlying stock trade sideways or down.

In a new research report, UBS thinks overwriting on certain companies is a great idea now. However, the UBS analysts listed six stocks to definitely not employ the tactic on as they continue to see the possibility for near-term outperformance, despite these companies already having had a strong 2016. We picked four that looked like very solid choices now, and may be good buys as well.

Coach

This consumer discretionary stock is fighting its way back after getting annihilated last year. Coach Inc. (NYSE: COH) is a leading New York design house of modern luxury accessories and lifestyle brands. The Coach brand was established in New York City in 1941 and has a rich heritage of pairing exceptional leathers and materials with innovative design.

Coach products are sold worldwide through Coach stores, select department stores and specialty stores, and through company’s website. In 2015, Coach acquired Stuart Weitzman, a global leader in designer footwear, sold in more than 70 countries.