Reflecting on my BMY options strategy and trades. What I did right. What I did wrong. What I am going to do next.
BMY is the symbol for Bristol Myers Squibb Co. It is an American multinational pharmaceutical company and also one of the world’s largest pharmaceutical companies.
Learning to Evaluate BMY
At the beginning of 2022, I attended a course called Options Millionaire Intensive (affiliate link). OMI is a 3-day live / virtual bootcamp. I learnt some interesting investing concepts and strategies. One of them is a checklist for evaluating whether a company is good.
- Operating cashflow (OCF) of a good company should be consistently positive. A bonus if it is growing.
- Net profit margin should be positive. 10% and more to be considered good.
- Interest coverage ratio should be positive. The larger the number the better. Nil is also good. It means the company has no loans.
- The current year Price/Earning ratio (PE) should be lower than the 5-yr PE
- The current year Earning Per Share (EPS) should be higher than the 5-yr EPS
- The value line should be higher than the current share price. This means that the company shares could be trading at a discount.
Applying the OMI checklist to BMY (2022)
- BMY’s OCF is positive and growing. TTM is 16,195 mil
- Net profit margin is more than 10% except 2020 which is negative (what are the circumstances that created the negative value?). TTM is 13.31%
- Interest coverage ratio is healthy except for 2020. TTM is 6.55
- Current PE ratio is 26.6. 5-yr PE ratio is 53.4
- Current EPS is 2.82.
- The value line is 53.4 x 2.82 = $150.58
Book value per share is 14.83. 5-yr BVPS is 13.05. The net worth of BMY has grown slightly.
BMY Options: Buying LEAP Calls
5 Apr 2022 – bought 1 call option expiring 19 Jan 2024 with a strike price of $70 at a cost of $1,130. Closed on 12 April 2024 for $1,300. Profit: $169.93
The stock market has entered the bear market. I need to rethink my BMY options strategy.