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YUM! BRANDS  
My Perspective

Yum Brands controls 5 different concepts. KFC, PIZZA HUT, TACO BELL, Long John Silver and A&W. YUM Brands now has 36,000 restaurants in 110 countries and continues to open more outlets every month.

Through the five concepts of KFC, Pizza Hut, Taco Bell, LJS and A&W (the Concepts), the Company develops, operates, franchises and licenses a worldwide system of restaurants, which prepare, package and sell a menu of food items. The Company either operates units or they are operated by independent franchisees or licensees under the terms of franchise or license agreements.

In addition, the Company owns non-controlling interests in Unconsolidated Affiliates in China who operate similar to franchisees. YUM's business consists of three segments: United States, YUM Restaurants International (YRI) and the China Division. The China Division includes mainland China (China), Thailand and KFC Taiwan, and YRI includes the remainder of its international operations.

Recently I watched a special on TV about Asia and people are lined up outside KFC, Taco Bell and Pizza Hut. In China KFC is incredibly popular. The sales figures show that while YUM is growing slowly in North America, they are growing rapidly in Asia. This company is growing.  

McDonalds has a market cap of 60.91 Billion. Yum Brands is now at 15.64 Billion and growing faster than McDonalds. Every year Yum Brands has increased its market cap. It is now 25% as large as McDonalds. It is definitely a large cap player and will be around for quite some time. While I am not interested in owning this stock, I donít expect any kind of dramatic sell off in the stock.

 

 

 

 

  YUM! BRANDS  (YUM) - 2009
ONGOING EVALUATION & TRADE
My goal for YUM is to collect income from naked put writing. When the stock gets over-valued (in my opinion) I will revert back to selling laddered naked puts to keep myself below the stock price to try to avoid being assigned at a too high a level. Should I get assigned I should be able to sell the stock through covered call writing as I will be in the low range for this stock. Yum's chart looks promising for selling naked puts consistently.
YUM TRADES BY YEARS
VIEW YUM-2011 TRADES
VIEW YUM-2010 TRADES
VIEW YUM-2009 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: 2009 - Trade Commenced Aug 11 2009
Goal for 2009: 5% (5 months)
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2009 30,000.00
Income Earned in 2009 (5 months) 1,397.25
Return On Capital in 2009 (5 months) 4.6%
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YEAR - 1:  2009
TRADE COMMENCED Aug 11 2009
GOAL FOR 2009: 12%

ONGOING STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED


Yum Brands controls 5 different concepts. KFC, PIZZA HUT, TACO BELL, Long John Silver and A&W. YUM Brands now has 36,000 restaurants in 110 countries and continues to open more outlets every month. Recently I watched a special on TV about Asia and people are lined up outside KFC, Taco Bell and Pizza Hut. In China KFC is incredibly popular. The sales figures show that while YUM is growing slowly in North America, they are growing rapidly in Asia. Overall the trend is for more growth.

McDonalds has a market cap of 60.91 Billion. Yum Brands is now at 15.64 Billion and growing faster than McDonalds. Every year Yum Brands has increased its market cap. It is now 25% as large as McDonalds. It is definitely a large cap player and will be around for quite some time. While I am not interested in owning this stock, I donít expect a bankruptcy soon. This means if the stocks falls, I get assigned and/or I have to average down, I can do so with enough confidence that I donít have to worry about my investment being wiped out.

Yum's revenue per share is 23.31 (as of 2009) which is higher than McDonalds. Revenue is currently around 10.9 Billion and debt is 3.55 billion, however much of this debt is long term. Quarterly earnings growth is about 35 %. In contrast McDonalds revenue is 22.56 billion with a debt load of 11 billion spread out from short to long term duration. McDonalds quarterly earnings growth has been ranging between negative 3% to 6%. (2008-2009)

Both companies have raised their dividends almost annually which should lead to some support for YUM as its dividend is now over 2%, which is greater than the S&P 500 average of 1.5%. It's PE is below average.

My goal for YUM is to collect income from naked put writing. When you look at the chart on YUM over the past 3 years, the company has a trading range between about 25.00 and just over 40.00. On the chart, the yellow highlight is showing the share price of 30.00. For writing naked puts if I stay close to or below $30.00 I should be able to minimize the chance of assignment to perhaps once or twice each year. Should I get assigned I should be able to sell the stock through covered call writing as I will be in the low range for this stock. The chart looks promising for selling naked puts. At times I will use the "reverse ladder approach" so I can sell puts below 30.00 for decent premiums. My goal would be to try to earn 12% annually. Looking at the chart, even when this stock pulled back in Sep 2008, Nov 2008 and Mar 2009, all three times it recovered to above 30.00. Therefore I feel confident that I can sell puts below the $30.00 strike, as far out as 6 months, being aware that I have about a 25% chance of being assigned. However unless something dramatic should befall Yum! Brands, I have a 99% chance that the stock will at some point during the year recover to $30.00, so I can be exercised out of any assigned shares. Let's see how I do.

 

Aug 11 09 35.13 Sold 5 Naked Puts Sep 32 @ .35 1.0 0 32.00 13.25 0 0 161.75 161.75
Aug 24 09 35.65 Sold 10 Naked Puts Oct 30 @ .28 .90 0 30.38 19.50 0 0 260.50 422.25
Sep 18 09 34.74 Expiration Day 5 Sep 32 Naked Puts Expired                
Sep 22 09 33.80 Sold 5 Naked Puts Jan 29 @ .70 2.4 0 29.16 13.25 0 0 336.75 759.00
Oct 16 09 35.25 Expiration: 5 Naked Puts Oct 30 expired                
Oct 20 09 35.25 Sold 5 Naked Puts Dec 33 @ .60 1.8     13.25     286.75 1045.75
Dec 18 09 34.51 Expiry: 5 Naked Puts Dec 33 expired                
Dec 21 09 35.00 STO 5 Naked Puts Jan 34 @ .40 1.1     13.25     186.75 1232.50
Dec 29 09 35.20 BTC 5 Naked Puts Jan 29 @ .06 (0.2)     13.25     (43.25) 1189.25
Dec 29 09 35.20 STO 4 Naked Puts Feb 33 @ .55 1.6     12.00     208.00 1397.25
    END OF 2009 - INCOME $1397.25                
                     
YUM TRADES BY YEARS
VIEW YUM-2011 TRADES
VIEW YUM-2010 TRADES
VIEW YUM-2009 TRADES

 

 

 

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