Monday, July 25, 2011

RSY: DLX, Optional Options

Deluxe Corporation (DLX)-- Sabrient rates DLX a Strong Buy for its solid value profile, which makes it one of the better value stocks in today's market, despite modest growth and momentum scores. The RSY portfolio loves growth at a reasonable price (GARP) stocks but value is more important versus growth rates. Weakness in the projected earnings growth gives it a low Earnings Score from Sabrient. But with a Sabrient Fundamental Score of 98.3 (which measures a company's financial health, including its balance sheet, cash flow, revenue, and earnings quality), Deluxe is significantly higher than the average of its industry group of 57.0.

According to SmartConsensus, DLX and its 5 other peers in the Commercial Printing Services industry all received a hold rating from them. Not a lot of excitement there. DLX's accounting practices are with-in an acceptable range and risk is average. As a solid value stock it should outperform the market over the longer-term and with its dividend yield of over 4%, it pays to hold this one. The middle of August should be its next ex-dividend date.

NakedValue noted that DLX was an Under-the-Radar Low P/E Dividend Paying Stock. That was the good part but then it described the earmarks of a maturing industry with margins increasing but sales decreasing. Like most companies in maturing industries, endeavors into the on-line services is one of their goals. Deluxe recently purchased Banker's Dashboard which give banks daily access to their financial position through on-line tools.

The PE ratio (TTM) is just 8.42 and forward looking it is expected to decline slightly. For a more complete analysis of Deluxe's cash flow check out Why Deluxe's Earnings Are Outstanding.

RSY recommends a buy of 200 shares of DLX at a limit price of $24.09 (GTC). This will be the first buy into the Consumer/Non-Cyclical sector and since this will be less than 5% of portfolio (based on a portfolio of $100,000), RSY also suggests to sell two put contracts of DLX of the Oct 22 '11 at $22.50 at a limit price of $1.25 (GTC).

Juice up Returns with Options.
Let us see if we can juice up the returns with some covered calls on our long positions. RSY presently holds a covered call of Foot Locker Jan '12 at $22.50 which is working out so far. Since RSY diversified across caps including some micro-cap and small-cap stocks, not all long positions have options available or have such shallow trading that it might not be worth the trouble such as BRKL. RSY recommends the following to consider:
1. Alliance Resource Partners (ARLP) Mar 17 '12 $80 Call, 1 option contract at limit price of $5.
2. Compass Diversified Holdings (CODI) Feb 18 '12 $17.50 Call, 2 option contracts at limit price of $0.50.
3. TOTAL S.A. (TOT) Feb 18 '12 $60 Call, 1 option contract at limit price of $2.40.


Checks and Services for Small Business, Banks, and Credit Unions - Deluxe Corp

Deluxe Corp, a small-cap value company in the consumer services sector, is expected to significantly outperform the market over the next six months with average risk.

The Advantage of Monthly Dividends Over Quarterly Dividends - Seeking Alpha

Smaller unit helps Deluxe post 4% sales gain - Seeking Alpha

Deluxe Corporation (NYSE:DLX)
Industry: Commercial Printing Services
Market Cap: $ 1,269.5mm (Mid Cap)

Average (48)
P/E (Trailing 12 mo.) 8.42x
EPS (Trailing 12 mo.) 2.946
Next Earnings Date 7/28/11
Market Cap 1.3 B
Shares Outstanding 51.4 M
Beta 2.0
Dividend Yield 4.08%
Declared Dividend 0.250
Ex-Dividend Date 5/19/11
Dividend Payable Date 6/6/11

(2) A non-binding resolution on executive compensation (or "say-on-pay vote"):

For: 34,792,130

Against: 1,690,330

Abstain: 129,725

Broker non-vote: 5,872,797

(3) A non-binding, advisory vote on the frequency with which we should conduct

future say-on-pay votes:

One year: 30,143,352

Two years: 308,412

Three years: 6,029,103

Abstain: 131,318

Broker non-vote: 5,872,797

Based on a determination of our Board of Directors in light of these

shareholder voting results, the Company has decided to conduct say-on-pay votes

every one year, until such time as our shareholders are next asked for an

advisory vote on the frequency of conducting future say-on-pay votes.

SmartConsensus Peer Ratings Detail:
6 holds; 90days ago: 3,3,1; 1 year ago: 2,2,1.

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