Good action in the options markets today, and one of the most interesting “sure bets” was seen in the calls of Dresser-Rand Group Inc. (DRC).
A trader bought 2,000 December $65 calls in Dresser-Rand Group Inc. (DRC) this morning when the stock was actually down almost two dollars. The buyer paid $1.90 to $2.10 for those Dec 65 calls. DRC is currently trading at $60.32 up $1.37.
Figuring out the why on these call buys is usually a guessing game, but for this Dresser-Rand Group Inc. (DRC) call buy it’s not. Back on July 17, a German magazine wrote about the fact Siemens was preparing a bid for DRC. On that report, shares of DRC gapped up from $60 to $70 and change the morning of July 17. But thanks to the amazing ADHD of American investors, the stock had slowly come back down to the $58 range as of yesterday.
This gave the people with inside knowledge of the progress of the buyout preparations a chance to make more money yet again. This trader clearly knows how the buyout offer is coming along, and it must now be imminent. We think it’s probably safe to get in here, even after todays runup. Based on the previous spike to $70 in July, we think the deal has to be in the $70 area.
Dresser-Rand Group Inc. (DRC) has traded as high as $72 in the past year, and as low as $51.46. It’s PE is a somewhat hefty 36 times earnings, and DRC did see it’s profits down this past quarter just announced yesterday.
DRC is currently rated a HOLD, with a price target of just $62.38. Clearly the “smart” analysts haven’t factored in the Siemens interest in the company. Not surprising as they usually are asleep at the wheel most of the time. Not exactly forward thinkers, those analysts.
Any kind of pullback this afternoon in the shares of Dresser-Rand Group Inc. (DRC) and we’ll be jumping in for some more of those calls.