“Cut-to-the-Chase” Recommendations - Week Beginning -
Monday, June 19, 2017

by Ian Harvey

IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.


Option Trade - iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA: FXI) Calls

Friday, June 23, 2017

** OPTION TRADE: Buy the FXI June 30 2017 39.5000 CALL at approximately $0.45. Sell price is left to your own judgment.

The iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA: FXI) has already performed very well since the start of 2017, but there could be more gains in store soon, indicating that the risk/reward is firmly bullish right now.

iShares China Large-Cap ETF (the Fund) is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index (the Underlying Index). The Fund’s portfolio of sectors includes Financials, Telecommunication, Oil & gas, Technology and Consumer goods.

This fund seeks to provide exposure to Chinese equities, serving as a pure play on the economy.

It has AUM of $3.19 billion and is a relatively expensive bet as it charges a fee of 74 basis points a year. From a sector look, Financials, Energy and Information Technology are the top three allocations of the fund, with 50.77%, 11.71 % and 10.76% exposure, respectively (as of June 13, 2017). From an individual holding perspective, Tencent Holdings Ltd, China Construction Bank Corp and China Mobile Ltd are the top three allocations of the fund, with 10.76%, 8.89% and 7.50% exposure, respectively (as of June 13, 2017). The fund has returned 24.52% in the last one year (as of June 14, 2017).

Year-to-date, FXI has gained 15.64%, versus a 9.21% rise in the benchmark S&P 500 index during the same period.

The International Monetary Fund (IMF) has raised China's GDP growth outlook to 6.7% for 2017 compared with its previous forecast of 6.6%. They also believe that the GDP growth for the second largest economy of the world will average around 6.4% during 2018-2020. This revision comes after IMF members toured Beijing and Lanzhou in China in the first two weeks of June to complete the Article IV review of the economy.

Also, an indicator from McMillan Analysis Corp., in a recently published a note, that their computer generated Put-Call Ratio Buy Signal which had surged to an incredibly high level since early May. This is a reflection of much higher bearish (put) volume in comparison to bullish (call) volume.

When put-call ratios get this out of balance, there is often a reversion to the means. In other words, the imbalance between bears and bulls is likely to correct soon, taking FXI’s share price higher in a short-term burst, as those betting against the fund cover their positions all at once.

FXI currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 32 ETFs in the China Equities ETFs category.

Summary

iShares FTSE/Xinhua China 25 Index (FXI) opened at 39.48 on Thursday. iShares FTSE/Xinhua China 25 Index has a 12-month low of $31.96 and a 12-month high of $40.70. The firm’s 50-day moving average price is $39.50 and its 200 day moving average price is $37.99.


Option Trade – Foot Locker, Inc. (NYSE:FL) Puts

Thursday, June 22, 2017

** OPTION TRADE: Buy the FL JULY 21 2017 45.000 PUT at approximately $0.70. Sell price is left to your own judgment.

News that Nike (NYSE: NKE) may be close to selling products directly on Amazon (NASDAQ: AMZN) is emerging. The analyst releasing this news is Goldman Sachs' Lindsay Drucker Mann. The analyst believes the move would expand Nike's access to millennials through the fast-growing Amazon distribution channel.

"Taking this step would give NKE direct economic exposure to a large and fast growing distribution channel, while improving the brand presentation and expanding access to Millennial shoppers. NKE's move could inspire other wholesale brands, many of which have so far resisted a partnership with amazon.com, to directly engage," Goldman Sachs analyst Lindsay Drucker Mann said.

Foot Locker, Inc. (NYSE:FL), a retailer of shoes and apparel, issued its quarterly earnings report before the market opened on Friday, May 19th, and “Cut-to-the-Chase” Members would have enjoyed a potential profit of 650% from our previous put option.

The apparel retailer warned in late April that comps slumped in the first month of the quarter thanks mainly to a delay in tax refunds. Growth picked up once those checks started flowing later on, but the boost "did not fully offset the slow start to the quarter," CEO Richard Johnson explained, as the company lowered its first-quarter outlook.

And when the company reported it missed guidance on revenue by 0.5% and on EPS by $0.02 (1.5%). This caused the share price to significantly decrease from the $71.30 to the current price of $54.86. This represented a 30.0% drop.

Now, following on from this, Foot Locker is one of the companies, in the sporting goods and shoe store sector, which is suffering from a wrecking ball due to the Goldman Sachs speculation; and plenty of volatility, can be expected if the Nike-Amazon relationship expands.

News that Nike is going to sell directly on Amazon is spreading. The claims that the world's biggest sportswear maker could be close to selling directly on Amazon.com, raising competition for brick-and-mortar sporting goods retailers is rife.

Foot Locker shares closed down 4.99% Wednesday, but were able to pick up a little pre-market.

Nike, whose products are already sold on Amazon through third-party and unlicensed dealers, could build an additional $300M to $500M of revenue in the United States or 1 percent of its global sales through its expansion as a wholesale dealer on Amazon.

The all-time highs in Foot Locker, Inc. seem like years ago at this point. FL stock is down about 40% in just a few weeks, kicking it far off its perch near the high-water mark it set late last year.

Analysts and Hedge Funds Opinions

Foot Locker, Inc. was downgraded by investment analysts at Bank of America Corporation from a “buy” rating to a “neutral” rating in a research report issued on Friday, May 19th, Marketbeat.com reports. They presently have a $65.00 target price on the athletic footwear retailer’s stock, down from their prior target price of $84.00.

Summary

As well, estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.

Foot Locker has a 52 week low of $44.87 and a 52 week high of $79.43. The company’s 50-day moving average is $64.78 and its 200 day moving average is $70.92. The firm has a market cap of $6.83 billion, a PE ratio of 10.68 and a beta of 0.63.


Option Trade - Comcast Corporation (NASDAQ:CMCSA) Calls

Wednesday, June 21, 2017

** OPTION TRADE: Buy the CMCSA AUG 18 2017 42.500 CALL at approximately $0.43. Sell price is left to your own judgment

Headquartered in Philadelphia, PA, Comcast Corporation (NASDAQ:CMCSA), a media and technology company, was among the S&P 500’s biggest fallers yesterday, Tuesday June 20. The stock experienced a 3.37% decline to $40.39 with 27.82 million shares changing hands.

Comcast Corporation Class A Common Stock started at an opening price of 40.50 and hit a high of $41.01 and a low of $39.92. This pullback has provided us with a great entry for this call option.

The growing cord-cutting trend looms large over the pay-tv industry. In fact, the shift to more internet streaming services has led some major pay-tv providers such as AT&T (NYSE:T) and Dish Network (NASDAQ:DISH) to meet consumers where they are with a linear TV streaming service of their own.

But the cable giant Comcast has yet to enter the streaming market. It hasn't had to, as it's actually been adding subscribers over the last couple of years. Comcast, the nation's largest cable provider, has done an excellent job holding on to its customers recently, so investors have no reason to be nervous due to this decline.

Influencing Factors

Comcast isn't interested in launching a nationwide television-streaming platform like AT&T's, Verizon's, or Dish's. Nor should it be, as long as its traditional video service continues to perform well and generate loads of revenue.

That said, Comcast is in a position such that it could quickly put together a nationwide streaming service of its own, should it decide to go that route. Earlier this year, the company exercised an option to obtain the streaming rights to several cable networks. While it doesn't include every network it would need to launch a successful over-the-top service, it's a good start -- and it cost Comcast nothing.

Meanwhile, Comcast is in the midst of renegotiating deals with several major media companies, and nationwide streaming rights are likely to be a point of discussion. Media companies are desperate to increase their affiliate fee per subscriber as more people cut the cord, and throwing in additional perks like on-demand and streaming rights is one way to boost revenue.

While it may cost Comcast a little more to buy the extra rights, it can use additional on-demand rights in its popular X1 platform -- which it credits for its reduced churn rate lately. It's also been able to increase its rates, although at a slower pace than programming costs. Consider it insurance in case the competition starts cutting into subscriber growth again.

Furthermore, now that Comcast has its own wireless service, Xfinity Mobile, through its MVNO (mobile virtual network operator) agreement with Verizon, it could market a nationwide bundle of mobile phone and television service. The move wouldn't have the same economic advantages as selling Xfinity Mobile into its existing territory, but it would give the company equal footing against Verizon and AT&T.

For now, Comcast continues to perform well, slowly adding back subscribers, while its competitors look for growth anywhere they can get it. It's also well-positioned for a potential nationwide expansion.

Comcast Corp. recently brought together its various advertising technologies under a new division - Advanced Advertising Group. This division will include all ad-related technologies that it has acquired in last 12 years, along with its local cable ad sales business - Comcast Spotlight. The company has hired former Weather Channel executive, David Clark, to run the division.

In Aug 2015, Comcast acquired This Technology LLC., a video delivery and advertisement technology specialist. The core business area of This Technology is dynamic ad insertion. The company provides solutions for metadata management and integration of diversified video infrastructures with a wide range of ad server platforms. It also offers solutions for new content substitution into an existing video stream. In 2015, This Technology was awarded a patent in the field of ad inventory attributes identification.

Comcast acquired the New York-based Visible World, a leading provider of targeted-advertisement for TV programs in Jun 2015. With this, the company has established a solid foothold in the thriving data-driven TV advertisement market.

Analysts and Hedge Funds Opinions

Credit Suisse Group increased their target price on Comcast Corporation from $41.00 to $45.00 and gave the stock an “outperform” rating in a research note on Monday, May 15th.

Also, several other equities analysts have recently commented on the company…..

SunTrust Banks, Inc. started coverage on Comcast Corporation in a research report on Tuesday, April 18th. They issued a “buy” rating and a $45.00 target price on the stock.

Telsey Advisory Group raised their target price on Comcast Corporation from $44.00 to $47.00 and gave the stock an “outperform” rating in a research report on Friday, April 28th.

Deutsche Bank AG reiterated a “buy” rating and set a $47.00 price target (up previously from $44.00) on shares of Comcast Corporation in a report on Saturday, April 29th. Wunderlich lifted their price target on Comcast Corporation from $45.00 to $50.00 and gave the stock a “buy” rating in a report on Friday, April 28th. Macquarie reiterated a “buy” rating and set a $45.00 price target on shares of Comcast Corporation in a report on Thursday, April 27th.

Pivotal Research cut their price objective on Comcast Corporation to $48.00 and set a “buy” rating on the stock in a report on Monday, March 6th.

Two equities research analysts have rated the stock with a hold rating and twenty have issued a buy rating to the company. Comcast Corporation presently has a consensus rating of “Buy” and an average target price of $43.35.

Several institutional investors have recently made changes to their positions in the stock…..

Whittier Trust Co. raised its stake in shares of Comcast Corporation by 101.7% during the first quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission. The institutional investor owned 288,578 shares of the cable giant’s stock after buying an additional 145,515 shares during the period. Whittier Trust Co.’s holdings in Comcast Corporation were worth $10,847,000 at the end of the most recent quarter.

Baker Ellis Asset Management LLC increased its stake in shares of Comcast Corporation by 99.2% during the first quarter, according to its most recent Form 13F filing with the SEC. The firm owned 50,300 shares of the cable giant’s stock after buying an additional 25,050 shares during the period. Baker Ellis Asset Management LLC’s holdings in Comcast Corporation were worth $1,891,000 as of its most recent filing with the SEC.

Summary

Comcast Corporation’s 50 day moving average price is $40.16 and its 200 day moving average price is $37.69. Comcast Corporation has a 12 month low of $30.02 and a 12 month high of $42.18. The firm has a market capitalization of $198.65 billion, a P/E ratio of 22.18 and a beta of 1.04.


Option Trade - Bed Bath & Beyond Inc. (NASDAQ:BBBY) Puts

Monday, June 19, 2017

** OPTION TRADE: Buy the BBBY JULY 21 2017 32.500 PUT at approximately $0.50. Sell price is left to your own judgment.

Bed Bath & Beyond Inc. (NASDAQ:BBBY), a specialty retailer of domestic merchandise and home furnishings, will report its fiscal first-quarter numbers on June 22. The company is expected to post its quarterly numbers after the market close, with the consensus calling for earnings of $0.66. During the same period last year the company had earnings of $0.80.

So far the earnings season has been rather mixed for retailers. Retailers that have managed to improve their e-commerce business enjoyed nice gains on their quarterly reports, but those retailers that have not managed to improve their e-commerce business were punished.

Whilst other retailers are closing brick-and-mortar stores and putting more attention in e-commerce, Bed Bath & Beyond is actively opening more locations, planning to open 30 new stores over the next year, while closing 15 to 20 existing locations. It is encouraging to see them closing some locations, but the net result will be more locations, which could come back to haunt the company as consumers continue to do more shopping online.

Last quarter the company reported comparable same-store sales that fell in the low single-digit range.

Year to date, the stock has fallen 13.7%.

Influencing Factors

Bed Bath & Beyond has underperformed the categorized Retail – Miscellaneous/Diversified industry over the last one year. The company’s shares have plunged 14.7%, compared with the industry’s dip of 1.9% in the said time frame.

The company has been reeling under sluggish mall traffic, with increasing shift toward online shopping. Despite posting better-than-expected fourth-quarter fiscal 2016 results, the company’s margins continued to remain under pressure. The margin pressure stemmed from increased shipping and promotional costs, along with a rise in SG&A expenses.

Management expects these factors to linger and consequently impact the gross margin and SG&A expenses in fiscal 2017. This in turn is likely to dent the company’s bottom-line. Consequently, the company provided dismal earnings per share view for fiscal 2017, which is expected to decline in the range of low-single digits percentage to 10%.

Apart from this, Bed Bath & Beyond's global presence keeps it exposed to the threat of adverse currency fluctuations, which have troubled the company to quite an extent in the past.

These factors clearly raise concerns, making for an apprehensive situation about the upcoming results.

Analysts and Hedge Funds Opinions

Zacks Investment Research cut shares of Bed Bath & Beyond from a “hold” rating to a “sell” rating in a report on Monday.

Also, several other equities analysts have recently commented on the company…..

Oppenheimer Holdings, Inc. restated a “hold” rating on shares of Bed Bath & Beyond in a report on Thursday, April 6th.

Telsey Advisory Group dropped their target price on shares of Bed Bath & Beyond from $42.00 to $41.00 and set a “market perform” rating on the stock in a report on Thursday, April 6th.

Finally, Citigroup Inc. dropped their target price on shares of Bed Bath & Beyond from $40.00 to $35.00 and set a “sell” rating on the stock in a report on Friday, April 7th.

Seven research analysts have rated the stock with a sell rating, sixteen have assigned a hold rating, one has issued a buy rating and one has assigned a strong buy rating to the stock. Bed Bath & Beyond presently has a consensus rating of “Hold” and an average price target of $42.87.

Also, CEO Steven H. Temares sold 96,109 shares of the stock in a transaction that occurred on Tuesday, May 9th.

As well, CEO Steven H. Temares sold 200,000 shares of the stock in a transaction that occurred on Friday, April 21st.

Summary

Bed Bath & Beyond has a 12 month low of $33.63 and a 12 month high of $48.83. The stock’s 50 day moving average is $35.98 and its 200 day moving average is $39.81. The company has a market capitalization of $5.13 billion, a P/E ratio of 7.84 and a beta of 1.01.


Option Trade - Carnival Corp (NYSE:CCL) Calls

Monday, June 19, 2017

** OPTION TRADE: Buy the CCL JULY 21 2017 67.500 CALL at approximately $0.85. Sell price is left to your own judgment.

Carnival Corp (NYSE:CCL), a cruise company, will report second-quarter results before the market opens on June 22. The consensus calls for earnings of $0.47 per share, down from $0.49 during the same period last year.

The consensus calls for Q2 earnings to drop from $0.49 last year to $0.47 this year, but the street has a higher whisper number of $0.50 for the quarter. The stock has a low valuation, with a P/E of 16.1, so there is plenty of upside potential when the company hits its estimates.

Carnival is the world’s largest leisure travel company with a fleet of 103 cruise ships visiting over 700 global ports.

CCL shares have been strong over the last year, as improvements in the overall economy, in particular the labor market, should keep demand high for travel and tourism companies. CCL has done a great job in recent years growing its earnings; with annual earnings up 33.0% per annum over the last five years, and analysts see additional annual earnings growth of 14.1% over the next five years.

Stifel analyst, Steven Wieczynski, reiterated his Buy rating on shares of Carnival Corporation and expects F2Q17 earnings to beat, full year guidance to increase and management to speak positively about early-2018 booking trends.

The analyst did add a caveat stating "it is always difficult to accurately measure just how much of the anticipated positive news is already priced into the shares. Furthermore, we believe a challenging y/y comparison, most notably with respect to China (lapping pre-travel restriction period), could temper some of the post-Q positivity around the name. All told, we remain upbeat about the prospects for CCL and the cruise industry more broadly heading into 2H17, thus we confidently reiterate our Buy rating and $68 target price on CCL shares ahead of the company’s F2Q17 earnings release".

The stock has gained 24.9% on the year.

Influencing Factors

According to a projection from trade group Cruise Lines International Association, more than 25 million will take to the seas using cruise ships this year. As of Dec 2016, 26 new ships had been, of which ocean vessels amounted to $6.8 billion. A majority of travel agents expect cruise sales to increase this year. During 2005-15, the demand for cruises experienced a 62% jump.

Industry insiders expect the demand for cruise ships to remain strong this year. Their attractive pricing versus land based trips and their wide ranging appeal are other factors which give them an advantage. As investments, they stand out for their comparatively reasonable valuations and long-term potential. These are the investments you would buy and hold for extended periods for solid returns.

Carnival Corp. said it understands the policy changes on Cuba that President Trump will announce in Miami today do not include any changes for cruises.

In a statement, Carnival said it is "pleased" that its ships will continue to sail to Cuba.

"Our experience in Cuba this past year has been extremely positive," Carnival Corp. said. It also said other Carnival Corp. brands have applied to travel to Cuba.

Carnival Corporation, the world’s largest leisure travel company, announced that its CEO Arnold Donald was named the top-ranked global executive for his strong leadership and commitment to improve diversity and inclusion in the workplace and for serving as an inspiring role model.

During Donald’s nearly four years as CEO, the company has appointed diverse leaders to serve as presidents of its cruise line brands and in various leadership roles within destination services, human resources, marketing and sales, operations and global procurement, while promoting diversity and inclusion throughout the company and its brands.

During this same time period, Carnival Corporation has expanded innovation in all areas of its business and achieved significant growth, including doubling its earnings since 2013 and recording the most profitable year in its history in 2016.

In 2016, Carnival Corporation was cited as one of the “50 Best Companies for Diversity” by Black Enterprise Magazine.

In April 2017, Carnival Corporation was named one of the top 100 Best Corporate Citizens for 2017 by Corporate Responsibility Magazine (CRM). The company ranked No. 23 in CRM’s 18th annual survey, highest among firms in the travel and tourism sector and the only cruise company to make the list.

Analysts and Hedge Funds Opinions

Carnival Corporation was upgraded by research analysts at Wolfe Research from a “market perform” rating to an “outperform” rating in a report issued on Thursday, May 25th.

Also, several other equities analysts have recently commented on the company…..

  • Wells Fargo & Company raised shares of Carnival Corporation from a “market perform” rating to an “outperform” rating in a research note on Tuesday, March 21st.
  • Argus raised shares of Carnival Corporation from a “hold” rating to a “buy” rating and raised their target price for the company from $56.03 to $64.00 in a research note on Monday, February 27th.
  •  William Blair raised shares of Carnival Corporation from a “market perform” rating to an “outperform” rating in a research note on Monday, March 20th.
  • Finally, Wedbush raised their target price on shares of Carnival Corporation from $54.00 to $61.00 and gave the company a “neutral” rating in a research note on Wednesday, March 29th.

One research analyst has rated the stock with a sell rating, eight have assigned a hold rating and fourteen have assigned a buy rating to the company’s stock. Carnival Corporation has a consensus rating of “Buy” and a consensus target price of $57.92.

Summary

The company has a strong track record of posting better than expected results, and has not posted a negative earnings surprise since the fourth-quarter 2010. As long as the company is able to post another solid set of quarterly numbers the stock should move higher following the report.

Carnival Corporation’s 50 day moving average price is $63.06 and its 200 day moving average price is $57.50. The firm has a market cap of $47.65 billion, a price-to-earnings ratio of 16.18 and a beta of 0.77. Carnival Corporation has a 52-week low of $42.94 and a 52-week high of $66.48.


Option Trade - Accenture Plc. (NYSE:ACN) Puts

Monday, June 19, 2017

** OPTION TRADE: Buy the ACN JULY 21 2017 120.000 PUT at approximately $0.80. Sell price is left to your own judgment.

Accenture Plc. (NYSE:ACN), a professional services company serving clients in various industries and in geographic regions, including North America, Europe and Growth Markets, is set to report third-quarter fiscal 2017 results on Jun 22.

The stock of this professional services firm tends to drop after nearly every earnings report, and it is expected that this time will be no different.

Last time, Accenture dropped from $126 to $114 after it reported, and is now back up to $127.

Analysts expect $1.51 earnings per share, up $0.10 or 7.09 % from last year’s $1.41 same quarter earnings. This translates into $975.51M profit for ACN giving the stock a 20.97 P/E. This is assuming the current $1.51 EPS is accurate. Accenture Plc’s Wall Street analysts see 13.53 % EPS growth, taking into account the $1.33 EPS reported in the previous quarter.

Influencing Factors

The latest forecast for worldwide IT spending by Gartner raises concerns about Accenture’s fiscal third-quarter performance. The research firm lowered its forecast on IT spending for 2017. The recent forecast of 1.4% year-over-year growth in IT spending is 1.3% lower than its previous projection of 2.7% growth. Moreover, as Accenture is the world’s leading IT services provider, a decline in IT spending will surely have a negative impact on the company’s to-be-reported quarterly results.

Furthermore, Gartner cited rising U.S. dollar exchange rate as the main reason behind lowering its estimate. Notably, Accenture derives approximately 54% of total revenue from outside the U.S. in the form of key currencies such as pound, Euro, Australian Dollar and Yen. Thus, a rise in U.S. dollar exchange rate will also adversely affect the company’s overall performance, which may be seen in the upcoming quarterly results.

Additionally, increasing competition from peers such as Cognizant Technology Solutions (CTSH ) and International Business Machines Corporation, as well as an uncertain macroeconomic environment may deter its growth to some extent.

Investor’s sentiment decreased to 0.93 in 2016 Q4, down 0.06, from 0.99 in 2016Q3. It turned negative, as 48 investors sold ACN shares while 379 reduced holdings. 98 funds opened positions while 298 raised stakes. 466.12 million shares or 9.23% more from 426.72 million shares in 2016Q3 were reported.

Analysts and Hedge Funds Opinions

Goldman Sachs Group Inc. cut Accenture Plc. from a “neutral” rating to a “sell” rating and set a $110.00 price target for the company in a research note on Monday, April 3rd.

Morgan Stanley decreased its stake in Accenture Plc by 6.71% based on its latest 2016Q4 regulatory filing with the SEC. Morgan Stanley sold 598,751 shares as the company’s stock declined 0.21% while stock markets rallied. The institutional investor held 8.32 million shares of the business services company at the end of 2016Q4, valued at $974.29M, down from 8.92M at the end of the previous reported quarter. Morgan Stanley, who had been investing in Accenture for a number of months, seems to be less bullish on the $81.82B market cap company.

Summary

Accenture Plc has a 50 day moving average price of $119.60 and a 200-day moving average price of $119.53. Accenture Plc has a 12-month low of $108.66 and a 12-month high of $126.53. The company has a market cap of $76.13 billion, a PE ratio of 20.45 and a beta of 1.17.





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