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 – The Home Depot, Inc. (NYSE:HD) Calls
Friday, January 27, 2017
**OPTION TRADE: Buy the HD FEB 17 2017 140.000 call at approximately $1.30. Sell price is left to your own judgment.
The Home Depot, Inc. (NYSE:HD), the leader in the home-improvement retail space, continues to maintain its position in investors’ good books, with the stock witnessing fantastic growth of 13.3% in the past one year.
The company is on a Jan. 31 fiscal year,
and last FY reported earnings per share of $5.46. For FY 2017, Standard &
Poor’s raised its earnings estimate by 2 cents to $6.33 and their FY 2018
estimate to $7.18.
They also raised HD’s price target by $3
The increases are due to the cyclical
nature of Home Depot’s business and S&P’s revised increases for GDP. The
purchase of Interline Brands in August should help the parent company increase
its revenues by 6.3% in FY 2017. A moderate housing recovery is also built into
Technically HD stock is in a broad bull
market with support at about $123 and resistance at $150. However the break
from a one-month double top on Monday at $137 supported by a Golden Cross
(50-day crosses 200-day moving average), and a new MACD buy signal, bring
renewed energy to the stock’s momentum.
The renewed momentum is because the
small double top is part of a larger quadruple top which began in April 2016,
thus the breakout carries more significance than a simple break from a small
Therefore, this compels the reasoning
for this recommended options trade.
Home Depot’s success story can mainly be
attributed to the consistent gains from improving customer experience, solid
execution and steady housing market recovery. This leading player in the
highly-fragmented home improvement industry has been revamping itself by
concentrating on square footage growth and maximizing productivity from its
existing store base. Additionally, the company has implemented significant
changes in its store operations to make them simpler and more
customer-friendly. We believe these initiatives will drive more traffic to its
Further, Home Depot remains focused on
developing merchandising tools and increasing investment in eCommerce to boost
top-line growth and enhance market share. Moreover, it is on track to achieve
its long-term dividend payout, share repurchase and return on investment
targets, given its disciplined capital allocation strategy. The company targets
dividend payout ratio of about 50% of earnings and plans to complete the
remaining $11 billion share repurchase authorization by fiscal 2017 end. It
also aims to achieve a return on invested capital of 35% by fiscal 2018.
Additionally, the company has been
implementing several initiatives to drive long-term growth. In response to the
evolving retail environment, where digital and physical stores go hand in hand,
the company remains keen on building its interconnected capabilities. To do
this, Home Depot is constantly investing in content, developing its website and
improving mobile experience to enhance customer experience. We expect these
initiatives to drive the company’s top-line and bottom-line growth in the long
Coming to its solid earnings
performance, Home Depot has been reporting strong financial figures since 2008,
with steady improvement in revenues, earnings per share and net income. The
company retained its four-year long trend of consistently beating earnings
estimates, by delivering a positive earnings surprise in third-quarter fiscal
2016. Additionally, the company’s top-line was ahead of estimates and grew year
Home Depot, Inc. was upgraded by Zacks Investment Research from a “hold” rating to a “buy” rating in a note issued to investors Tuesday, week ago. The firm currently has a $151.00 price target on the home improvement retailer’s stock. Zacks Investment Research’s target price indicates a potential upside of 11.82% from the stock’s current price.
According to Zacks, “Home Depot has outperformed the broader industry in the past one year, given the consistent gains from improving customer experience, solid execution and consistent housing market recovery. It is also on track to achieve its long-term dividend payout, share repurchase and return on investment targets. Home Depot’s focus on developing merchandising tools, along with investment in building its interconnected capabilities is expected to boost its top line, and enhance market share. Also, the company's raised earnings growth guidance for fiscal 2016 bolsters optimism. However, intense competition and a soft economic recovery may prove deterrents, pushing back home improvement projects. The company’s significant exposure to international markets makes it vulnerable to currency headwinds. Estimates have been stable ahead of the company’s Q4 earnings release, while it has positive record of earnings surprises in recent quarters.”
One investment analyst has rated the stock with a sell rating, six have issued a hold rating and nineteen have given a buy rating to the stock. The stock currently has a consensus rating of “Buy” and an average target price of $144.68.
Home Depot, Inc. has a 12-month low of $109.62 and a 12-month high of $139.00. The company has a market capitalization of $164.50 billion, a P/E ratio of 21.92 and a beta of 1.09. The firm has a 50-day moving average price of $133.77 and a 200 day moving average price of $131.26.
Option Trade – ONEOK, Inc. (NYSE:OKE) Calls
Friday, January 27, 2017
**OPTION TRADE: Buy the OKE MARCH 17 2017 57.500 call at approximately $1.00. Sell price is left to your own judgment.
ONEOK, Inc. (NYSE:OKE), the sole general partner of ONEOK Partners, L.P. (ONEOK Partners), a master limited partnership engaged in the gathering, processing, storage and transportation of natural gas in the United States, certainly returned some great profit the last time we recommended it, on the31st October last year. OKE has now provided another opportunity to profit as the shares have recently pulled back to key moving averages.
OKEOK has nearly tripled in value since its low of $18.88 last February, most recently seen at $55.19. Just before the end of 2016, OKE notched a two-year high just below the round $60 level, and has since pulled back to its rising 80-day moving average. The last four times the stock has pulled back to this level, it has averaged a 21-day return of 9.2%, ending positive each time. Such a move this time around would have OKE atop the $60 mark.
Why ONEOK, Inc.?
As we previously stated, it's hard not to love a stock that's gone up nearly 110% so far this year, which is the case for ONEOK, Inc .
“The company has a great opportunity to continue growing as demand for natural gas continues to expand in North America. ONEOK's network of pipelines and gathering is set for strong growth for years to come, and that should lead to regular increases in ONEOK's dividend, which -- even after a more than doubling of ONEOK's stock price -- still yields 4.7%.
Put it all together, and you have a great company whose stock has strong price appreciation potential.”
Also, despite the bullish technical
setup already mentioned, there's almost no optimism levied toward OKE across
Wall Street. In the options pits, for instance, put buying has been extremely
popular. While some puts may have been purchased by shareholders hedging, an
exodus among "vanilla" bears could create tailwinds.
ONEOK is also heavily shorted. Stated
simply, there's plenty of room for short-covering activity to help the shares
climb the charts.
Analysts might be the most bearish of
all, however. Just one of 13 brokerage firms recommend buying OKE, and the
equity is trading above its average 12-month price target of $52.53. It seems
analysts could be forced to re-evaluate their positions on OKE, and any bullish
attention should be a boon.
As well, equities research analysts at
US Capital Advisors upped their FY2016 EPS estimates for ONEOK in a research
report issued last Wednesday. US Capital Advisors analyst B. Followill now
expects that the brokerage will post earnings per share of $1.75 for the year,
up from their previous forecast of $1.73. US Capital Advisors also issued
estimates for Oneok’s Q4 2016 earnings at $0.49 EPS and FY2018 earnings at
ONEOK has a 50-day moving average of $57.45 and a 200-day moving average of $50.75. ONEOK has a 52 week low of $18.88 and a 52 week high of $59.47. The company has a market capitalization of $11.85 billion, a PE ratio of 41.57 and a beta of 1.14.
Option Trade – Intel Corporation (NASDAQ:INTC) Calls
Wednesday, January 25, 2017
**OPTION TRADE: Buy the INTC FEB 17 2017 38.000 call at approximately $0.60. Sell price is left to your own judgment.
U.S. equities pushed to new highs on Tuesday thanks to a resumption of the "Trump-flation" trade - optimism over the economic policies of President Donald Trump.
Excitement continues over priorities including tax cuts, deregulation and more aggressive "America first" trade policies.
The S&P 500 is knocking on a new record thanks to reinvigorated interest in "hard economy" stocks - mainly big industrials and core technology names - that drove the historic post-election rally.
And Intel Corporation (NASDAQ:INTC), a designer and manufacturer of digital technology platforms, and one of the big-cap stocks, is driving this advance.
Intel Corporation shares are rising up and over a two-month consolidation range to challenge highs not seen since October. The company's recent efforts have focused on new areas of growth, including autonomous transportation, virtual reality/augmented reality and cloud computing; but if Trump successfully encourages a ramp up in capital expenditures and hiring across the corporate sector, there will be a surge of demand for regular PCs and servers as well, which remain at the heart of the company's revenue stream.
The semiconductor giant finished the session above the December peak, with the help of a big jump in trade. Following this impressive move, Intel stock has now recovered all of the post-earnings losses it suffered after a disappointing third-quarter earnings report.
Ahead of Thursday afternoon's earnings report, the stock is in a very positive position.
Analysts are looking for earnings of 75 cents per share on revenues of $15.8 billion.
Factors to Consider
It is noted that Intel has posted positive earnings surprise of 12.14% in the trailing four quarters. Intel’s growing focus into areas with better growth prospects, such as the artificial intelligence (AI) and Internet of Things (IoT) businesses are key catalysts.
Intel's official guidance for the fourth quarter points to revenue rising approximately 5% year over year, stopping at $15.7 billion. GAAP earnings are expected to fall 8% to $0.68 per diluted share.
In the third quarter, sales growth was spearheaded by double-digit annual percentage boosts in the Internet of Things and data center groups. Both of these divisions are enjoying solid long-term growth, setting the stage for another round of big growth numbers on Thursday. In particular, the rise in data center revenue rests on cloud computing solutions. IoT growth stems from Intel's efforts in selling embedded video, retail, and transportation products.
Taking a longer view of Intel's financial performance, the company's earnings and cash flows have held relatively steady over the last three years. Sales have been ticking upward in recent quarters.
Autonomous car driving also presents a significant growth opportunity for the company. During the fourth-quarter, Intel created a new division called Automated Driving Group (ADG), which focuses on this fast-emerging market. Reportedly, the company has also won self-driving car deals worth $1 billion in 2016. Most prominent among them is the partnership with German carmaker BMW and Mobileye for developing self-driving car technology.
Intel has said that it is currently involved in 30 vehicle programs, but that number would swell to 49 by 2020. Moreover, the company’s venture capital division will invest $250 million over the next two years into autonomous driving technology. The fund will support the development of self-driving and other technology (connectivity, communication, context awareness, deep learning, artificial intelligence (AI), safety and security) for cars globally.
The recent acquisition of 15% stake at high-precision digital mapping and location based services provider HERE will expand its presence in the automated driving technology market and pose a challenge to the dominance of NVIDIA. Further, strategic acquisitions like Yogitech, Arynga and Itseez have expanded Intel’s capabilities in the security and machine learning technology market.
Although Intel’s shares (up 24.8%) have underperformed the Semiconductor General industry (up 49.7%) in the last one year, it is believed that the investments in IoT, security and memory (NAND flash chips) will help the stock rebound in 2017. Moreover, stabilizing PC shipment trend as witnessed in the fourth-quarter 2016 is positive for the company.
Two weeks ago, the company announced a new platform for retail analytics and a robotic retail assistant. Intel plans to invest $100 million into retail-related IoT solutions over the next five years, and this was a taste of things to come.
Intel Corp.‘s stock had its “buy” rating reissued by equities researchers at Deutsche Bank AG in a research report issued to clients and investors on Tuesday. They presently have a $47.00 target price on the chip maker’s stock. Deutsche Bank AG’s target price indicates a potential upside of 24.93% from the company’s current price.
Seymore updated his 2017 earnings expectations based on improving expectations for the personal computer (PC) industry. “While an improving PC market is a positive for Intel, we remain conservative on the sustainability of this dynamic and reiterate that our positive view is based on strength in its core areas of [its] Data Center Group, Internet of Things (IoT) Group and Memory,” Seymore wrote.
Three research analysts have rated the stock with a sell rating, fifteen have issued a hold rating and thirty-three have assigned a buy rating to the company. Intel Corp. has an average rating of “Buy” and a consensus price target of $39.98.
If shares continue to gain traction here, a move into new 52-week high territory is very likely.
One thing is clear: Intel investors appear to be gaining confidence in this A-rated stock ahead of Thursday's report. It may take a very disappointing result to derail a fresh rally leg.
Intel is a member of the Dow Jones Industrial Average, S&P 500, and NASDAQ 100, and has significant market influence and the potential to impact the broader market gauges.
Intel Corp. has a 1-year low of $27.68 and a 1-year high of $38.36. The stock has a 50 day moving average price of $36.47 and a 200-day moving average price of $35.79. The stock has a market capitalization of $178.28 billion, a PE ratio of 17.65 and a beta of 1.06.
Option Trade – Century Aluminum Co (NASDAQ:CENX) Calls
Tuesday, January 24, 2017
**OPTION TRADE: Buy the CENX MAR 17 2017 15.000 call at approximately $1.10. Sell price is left to your own judgment.
Century Aluminum Co (NASDAQ:CENX), a primary aluminum producing company, is looking to be in a good position for a surge in stock price. That is because, not only does the stock have decent short-term momentum, but it is seeing solid activity on the earnings estimate revision front as well.
These positive earnings estimate revisions suggest that analysts are becoming more optimistic on CENX's earnings for the coming quarter and year. In fact, consensus estimates have moved sharply higher for both of these time frames over the past four weeks, suggesting that Century Aluminum seems to be a solid choice for this options trade.
Factors to Consider
In the past 30 days, one estimate has gone higher for Century Aluminum while none have gone lower in the same time period. The trend has been pretty favorable too, with estimates narrowing from a loss of 15 cents a share 30 days ago, to a loss of 14 cents today, a move of 6.7%.
Meanwhile, Century Aluminum's current year figures are also looking quite promising, with one estimate moving higher in the past month, compared to none lower. The consensus estimate trend has also seen a boost for this time frame, narrowing from a loss of 80 cents per share 30 days ago to a loss of 79 cents per share today, an increase of 1.3%.
Shares of aluminum producer Century Aluminum Co have also looked positive after the U.S. launched a trade complaint that could help the domestic aluminum industry overall.
The U.S. officially filed a trade complaint with the World Trade Organization that accuses China of expanding its aluminum production through cheap loans provided by state-run banks and subsidized energy prices. Subsidies have allowed Chinese aluminum producers to flood the market with cheap, subsidized aluminum and take market share from other countries around the world, according to the complaint.
If it's successful, this complaint could lead to tariffs that would make Chinese aluminum more expensive here in the U.S., helping manufacturers like Century Aluminum.
Insider Trades for Century Aluminum Co. show that the latest trade was made on 31 Dec 2016 where Bless (Michael A), the Chief Executive Officer completed a transaction type “Buy” in which 57309 shares were traded.
Large investors have recently modified their holdings of the stock…..
The stock has also started to move higher lately, adding 35.7% over the past four weeks, suggesting that investors are starting to take note which will help increase volume and ultimately this options trade.
Shares of Century Aluminum’s 50-day moving average price are $9.71 and its 200-day moving average price is $7.94. Century Aluminum has a 52-week low of $3.20 and a 52-week high of $13.84. The firm’s market capitalization is $1.20 billion.
The stock is currently showing YTD performance of 60.63 Percent. The company has Beta Value of 0.74 and ATR value of 0.71. The Weekly and Monthly Volatility stands at 8.98% and 6.67%.