Here is a way to collect an attractive income stream on a top-tier tech consultant now, which you keep no matter what, while lining up a chance to buy the stock at a serious discount if it keeps falling.
Shares of consulting giant Accenture (ACN) have been on a difficult ride, now trading below their 52-week high. For investors who see a world-class business on the sale rack, that kind of drop creates an opportunity. One way to play it is to get paid a healthy income stream right now for simply agreeing to buy the stock at an even bigger discount, should it ever get there.
14% annualized yield at a 30% margin of safety, by selling put options
Sell a put option on ACN expiring 6/17/2027, with a strike price of $100.
Collect roughly $820 in premiums per contract (each contract covers 100 shares).
That works out to about 8.9% annualized on the $10,000 of cash you set aside to secure the trade.
Park that cash in a money market or savings account earning roughly 5.0%, and your total yield climbs to about 13.9%.
And if ACN falls below $100, you buy it at $100, an effective entry near $91.8 a share after the premium, about a 37% discount to today's $144.61.
Two Outcomes, You Keep The Cash Either Way
If ACN stays above $100 through 6/17/2027, the put expires worthless, and you simply keep the full $820 premium. That is about 8.2% on the $10,000 you set aside over 336 days, cash that might otherwise earn you 5.0% or so. You never buy the stock and keep the income, free to do it again.
If ACN closes below $100, you are assigned to buy 100 shares at $100. The $820 premium you already pocketed lowers your effective cost to about $91.8 a share, roughly a 37% discount to today's price, though if the stock has fallen further by then, you would be holding a paper loss.
So what happens if ACN really does close below $100, and you are the one buying? Then everything rests on a single question.
Would You Be Happy To Own ACN Down Here?
So, what kind of company would you be getting into if the stock drops and you end up a shareholder? On one hand, you're buying into a strategic overhaul. Accenture is aggressively deploying capital, with plans to spend approximately $9 billion on acquisitions this year to push into higher-growth areas. This includes a major move into OT security that management says more than meaningfully broadens its scale in its addressable market there, and a new business called Accenture Edge targeting the mid-market.
This is the picture of a market leader using its scale to capture the next wave of tech spending. Management sees artificial intelligence as a massive tailwind, and the company is landing huge transformation deals, with 104 client bookings over $100 million so far this year, a 13% increase from last year. The company is still growing the bottom line, with EPS up 9% in the most recent quarter.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
