RIP Taxco

Word on the street is that Taxco has been shutdown by the health department. While I hope it isn't true, my heart tells me it might be time to move on.

While there is no shortage of cheap cheesedip slingin mexican restaurants in Atlanta, this one will be missed. Fortunately there are about 20 equally skeezy mexican restaurants right down the road on Buford Hwy for me to try!

One man's trash is another man's treasure

Waste Management (WM) is the nations largest provider of waste management services in the US. It has a history or raising dividends and generates over $1.5 billion dollars in free cash flow that it can use to further increase dividends or execute share buy-backs.

Here is a descrition from morning star:

"Founded in 1894, Waste Management is the nation's largest provider of collection, transfer, recycling, disposal, and waste-to-energy services. The firm serves nearly 20 million customers in the commercial, industrial, municipal, and residential markets. It has 268 landfills that receive 115 million tons of waste per year. Waste Management is the largest provider of domestic recycling services and generates roughly 56% of its revenue from its waste collection business."

As states look to trim budgets, they will look at ways of outsourcing services previously provided by local governments. WM should be a big recipient of outsourced waste services. Furthermore, WM sports an attractive 3.4% dividend yield. Here is a way to play it:

Buy 100 WM @ 37.40 :            ($-3,740)
Sell 1 Jan 12 37.50 Call:            $235
Sell 1 Jan 12 35 Put:                  $245
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Net outlay: $3,260

Potential return: $616 (235 +245+126 dividend +$10 appreciation) or a 19% return on a stock that needs to go up by <1%.

Breakeven: 33.85

Go Fish!

You won't like Google when it's angry!

Recently Google attempted to buy groupon for $6 billion. Thats Billion with a B. Foolishly, Groupon said "Thanks, but no thanks."

It appears Google just decided to copy their idea instead and hold onto their $6 billion. http://techcrunch.com/2011/01/20/is-this-googles-groupon-clone-well-the-logo-fits/

ARRRGHHH NOBODY SAYS NO TO GOOGLE!!!!

Short burritos, Long GS

Chipotle (CMG) has had quite a run the past year. I personally enjoy Willy's but that's neither here nor there. CMG has gone from 93.81 to an astronomical 262 over the past 52 weeks. It's currently selling for 223 and a trailing p/e of 43.15. Expectations are extremely high for Chipotle, and one little slip up might cause the stock to plummet. One bump in the road I can foresee for Chipotle is rising food costs shrinking its already low margins. Also, if unemployment stays high, people might begin looking for cheaper alternatives. Because of this, I don't believe Chipotle can maintain its past performance. I am short chipotle by buying a bearish put spread of Jan 12 230/220. I purchased the Jan 12 230 put and sold the 220 put for a net costs of $480 per spread.

I decided to finance this buy selling 1 JAN 12 Goldman Sachs put for $1,105. I would never buy Chipotle at 223, but I'd love to buy GS $11.05 lower than it is today.

If Chipotle is lower than 220 come Jan 12, the max return is $520 or 108%

If GS is greater than $150, you keep the full $1,105. If not, then you have to own 100 shares of goldman at an effective price of $138.95.

The potential combined return is $1,625 on a trade that you don't even have to spend any money on initially.

Look out for the pullback!

This market has been rising non-stop since September. Many believe that it has gotten ahead of itseld and is due for a correction. People are looking for any excuse for a sell off, so you might want to think about hedging to the downside or taking off any positions that you don't feel comfortable holding for the long-term. I prefer to open up longer-term positions to avoid the temptation of trading day-in and out. Hopefully the pullback will allow me to find some bargains.

Check out these charts over at Beating Buffett showing the VIX creeping up.