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 – Metlife Inc (NYSE:MET) Calls
Monday, 31st October, 2016
**OPTION TRADE: Buy the MET NOV 18 2016 48.000 call at approximately $0.70.
Sell price is left to your own judgment.
Metlife Inc (NYSE:MET), a provider of life insurance, annuities, employee benefits and asset management, appears to be set to fly past estimates on November 2nd.
Standard & Poor’s raised its 12-month price target on MET stock by $7 early this month due to the company’s restructuring plans, which will result in a spinoff/sale of its life insurance/annuity unit. S&P believes that the restructuring will enhance future earnings, leaving it with a broad overseas presence and more of an institutional focus in the U.S.
Management says the move should remove the company from the U.S. government’s additional rules and scrutiny concerning a “systemically important financial institution” (SIFI), and liabilities should be cut to a shorter-term duration.
S&P estimates operating earnings of $4.58 in 2016 and $5.75 in 2017. Thus this leading, diversified life insurance and financial services company is currently trading at just 8.3 times S&P’s earnings estimate for 2017 vs. a peer average forward of 9.6. At the current price, the dividend yield is 3.4%. Their price target for Metlife stock is $54.
Technically, Metlife stock has been consolidating within a “W” formation since April. It broke from the formation early this month, leaving a breakaway gap at $46.18 to $46.52, and triggering a major, long-term bull market signal — the golden cross.
The gap was closed during the formation of a small right triangle which found support at the stock’s 20-day moving average. Since August, MET stock has been accumulating buyers, thus the breakout is confirmation of a long-term change of trend from bear to bull.
The S&P’s target of $54 is probably a conservative figure, and the breakout could result in the run-up to a much higher level.
MetLife Inc. has a 52-week low of $35.00 and a 52-week high of $52.45. The stock has a market capitalization of $51.63 billion, a price-to-earnings ratio of 12.35 and a beta of 1.84. The firm has a 50 day moving average price of $45.53 and a 200 day moving average price of $43.50.
Option Trade – ONEOK, Inc. (NYSE:OKE) Calls
Monday, 31st October, 2016
**OPTION TRADE: Buy the OKE JAN 20 2017 52.500 call at approximately $1.20. 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, is expected to beat expectations when it reports third-quarter 2016 results after the closing bell tomorrow, Nov 1. Last quarter, this stock had reported a negative surprise of 2.38%.
Rising popularity of natural gas due to its clean-burning and affordable nature resulted in excessive production in the third quarter. This will likely add to ONEOK's top line in the third quarter as higher natural gas production will warrant higher use of the company's services. Moreover, ONEOK's contract restructuring initiatives and cost reduction efforts will continue through the third quarter, boosting its cash flows.
ONEOK anticipates natural gas liquids volume growth to be higher in the second half of 2016 than the first, driven by higher demand. Further, an increase in ethane demand due to a rise in petrochemical facilities and higher exports to Mexico spurred by growing demand in the third quarter will boost third-quarter revenues.
ONEOK has contracted 92% of its transportation capacity and 71% of its storage capacity, thereby increasing visibility on third-quarter revenues.
Why ONEOK, Inc.?
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. (NYSE: OKE) .
But there's more to it: 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, is a wonderful dividend source that's likely to grow over time, and is an ideal vehicle for retirement savings. That's why I can't help but love ONEOK.
Oneok has a 50 day moving average price of $49.29 and a 200 day moving average price of $45.11. Oneok has a 1-year low of $18.84 and a 1-year high of $51.72. The firm has a market cap of $10.14 billion, a PE ratio of 36.64 and a beta of 1.10.