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.
Thursday, December 31, 2015
Four Final 2015 Option Trades
1. Emerson Electric Co. (NYSE:EMR)
2. Bank of America Corp (NYSE:BAC)
3. General Electric Company (NYSE:GE)
4. Pfizer Inc. (NYSE:PFE)
Here are four quick trades to round out the 2015 year, and be ahead for the start of 2016.
**OPTION TRADE 1: Buy the EMR Feb 2016 50.000 call (EMR160219C00050000) at approximately $0.95.
Sell price is left to your own judgment.
Emerson Electric Co. (NYSE: EMR), a diversified global technology company, should head towards $49.64 per share according to 14 Analysts in consensus, with the higher price estimate target at $60.
Three analysts said to BUY the stock and Strong BUY signal was issued by “1” analyst, with no Sell ratings being issued.
Shares of Emerson Electric Co. appreciated by 5.69% during the last five trading days and is up 12.68% in the last 3-month period.
Furthermore, the stock does not look expensive on a relative basis.
By divesting non-profitable business segments will help consolidate profitable business processes that should act as the company's key drivers of future profit generation. As Emerson already looks undervalued according to analytical models, it is rated as a buy.
**OPTION TRADE 2: Buy the BAC Feb 2016 16.000 put (BAC160219P00016000) at approximately $0.29.
Sell price is left to your own judgment.
Bank of America Corp (NYSE: BAC), has had a rough go of it, giving up over 4% on the year, and currently trading at $17.11. Nonetheless, short interest on the stock has plummeted 13.8% in 2015, accounting for just 0.6% of its total float -- meaning there's little sideline cash available to fuel a short-squeeze situation. Likewise, the percentage of analysts rating Bank of America Corp a "buy" or better has exploded by 22.8% in the past year to 78%, suggesting future downgrades could be in store.
Also, the stock slumped by 1.01% to $17.10 on Wednesday morning, as the bank will post a fourth quarter pretax write-down of $600 million.
The write-down is tied to the redemption of $2 billion of trust preferred securities related to its Merrill Lynch acquisition.
As a result of the company's Merrill Lynch merger in 2009, it has recorded a discount to par value as purchase accounting adjustments associated with the securities, according to a statement.
**OPTION TRADE 3: Buy the GE Jan 2016 30.000 call (GE160115C00030000) at approximately $0.95.
Sell price is left to your own judgment.
General Electric Company (NYSE: GE), stock has surged 21% since 2nd October - when its undisturbed share price stood at $25.47 - on the back of high expectations for structural changes at corporate level that should drive operational improvement while securing it higher returns and a multitude of other benefits.
GE hit new 52-week highs ahead of Christmas. Shares have been in a trading range between $30 and $31 since the start of November. Usually, the longer the trading range, the bigger the breakout or breakdown will be.
GE is very resilient and, as it continues to de-risk its balance sheet, bulls will likely continue to support its stock price, suggesting possible targets well over $30.
**OPTION TRADE 4: Buy the PFE Feb 2016 33.000 call (PFE160219C00033000) at approximately $0.50.
Sell price is left to your own judgment.
Pfizer Inc. (NYSE: PFE), appears to have finally turned the corner and put the worst of its patent exclusivity issues in the rearview mirror. The loss of key patents covering cholesterol-fighting juggernaut Lipitor and anti-inflammatory drug Celebrex packed some unwanted punishment to Pfizer's top and bottom lines. However, in each of the past three quarters, Pfizer has delivered operational growth once the effects of currency fluctuations, divestments, and acquisitions are accounted for.
The big reason Pfizer was able to grow its business was the outstanding performance of a few key drugs. The launch of metastatic breast cancer drug Ibrance in February following its approval by the Food and Drug Administration was a big spark. Sales of Ibrance totaled $230 million in the third quarter -- just its second full quarter of sales. The pill, which essentially doubled progression-free survival for advanced breast cancer patients who are HER2-negative and estrogen-receptor positive and added more than four months to median survival relative to the placebo, looks well on its way to blockbuster status in 2016.
Pfizer, Inc. holds a current average rating of ‘buy’ and a consensus target price of $39.80. Several research firms evaluated its stock performance.
Vetr gave it a rating of ‘strong buy’ and a target price of $37.82. Independent Research GmbH gave it a rating of ‘neutral’ and a target price of $38. JPMorgan Chase & Co. gave it a rating of ‘outperform’ and a target price of $38. Atlantic Securities gave it a rating of ‘buy’ and a target price of $39. S&P Equity Research gave it a rating of ‘hold’ and a target price of $40. Cowen & Co. and Deutsche Bank both gave it a rating of ‘buy’ and a target price of $43. Argus gave it a rating of ‘buy’ and a target price of $46. Jefferies Group gave it a rating of ‘buy’ and a target price of $48.
Wednesday, December 30, 2015
Three Put Option Trades
1. Kinder Morgan Inc (NYSE:KMI)
2. FireEye Inc (NASDAQ:FEYE)
3. GoPro Inc (NASDAQ:GPRO)
The previous trades that have been recommended have been based on the fact that fund managers will be looking to “window dress” their portfolios – but they will also be looking to unload those companies that have been underperforming as well. Below are three trades based on this assumption.
**OPTION TRADE 1: Buy the KMI Jan 2016 15.000 put (KMI160115P00015000) at approximately $0.60. Sell price is left to your own judgment.
Kinder Morgan Inc (NYSE: KMI), owner and manager of a diversified portfolio of energy transportation and storage assets, is down a whopping 50% since reporting earnings in mid-October. Investor fear has weighed heavily on the stock and these fears became a sort of self-fulfilling prophecy for the company. Its weak stock price actually turned off a major source of capital, which led the company to do what was once thought unthinkable: slash its dividend.
While that dividend reduction temporarily halted the stock's slide, that doesn't mean the bottom is in. Here are three potential catalysts that could ignite more selling in Kinder Morgan's stock:-
1. Kinder Morgan has drawn fire in the past from the press and from short-sellers and these groups smell blood in the water. Because of that, they are likely going to continue their attacks.
Barron's, which has been negative on the company in the past, was quick to come out saying that the "worse might not be over" at Kinder Morgan pointing out that its outlook is "clouded by a very weak energy price environment." Further, it came out with another article that argued Kinder Morgan's fair value should be $13 per share, not the mid-teens range where shares are currently trading.
2. While Kinder Morgan is hoping that its dividend reduction will ease the pressure that has been weighing down its stock price, if history is our guide that might not be the case. That's because there is a good historical reference from an energy infrastructure company that took this same path.
3. Another weight that could push the stock down over the next few weeks is tax-loss selling by investors. With the stock down more than 60% year to date, investors with a higher cost basis could decide to sell the stock at a loss and either move on or buy it back a month later in hopes of catching a future rebound. And with no near-term positive catalysts on the horizon, investors might see that as a safe bet.
Kinder Morgan's stock price slide might not be done because it still has quite a number of catalysts that could drive it lower.
**OPTION TRADE 2: Buy the FEYE Jan 2016 20.000 put (FEYE160115P00020000) at approximately $0.40. Sell price is left to your own judgment.
FireEye Inc (NASDAQ: FEYE), has shed nearly 62% since peaking at an annual high of $55.33 in mid-June. The stock has been pressured lower beneath its 20- and 30-day trendlines, and now sits at $21.04 -- just three weeks after touching an all-time low of $19.76. In addition, the $22-$24 region emerged as a roadblock following an early November bear gap.
Shares of FireEye Inc have received a consensus recommendation of “Hold” from the thirty-four analysts that are presently covering the stock. Meanwhile, despite depleting by nearly 24% during the past two reporting periods, short interest still accounts for 12% of FEYE's total available float, which would take more than four days to repurchase, at the equity's average daily trading volume.
**OPTION TRADE 3: Buy the GPRO Jan 2016 18.000 put (GPRO160115P00018000) at approximately $0.95. Sell price is left to your own judgment.
GoPro Inc (NASDAQ: GPRO), has been abysmal over the past six months. Since flirting with $65 in mid-August, the stock has surrendered roughly 72%, and now sits at $18.22. The shares hit a record low of $15.90 on Dec. 14, and are now bumping up against their descending 30-day moving average.
As such, nearly half of GPRO's total available float is dedicated to short interest, representing more than four days' worth of pent-up buying demand, at the equity's average pace of trading.
More than half of the analysts following GoPro Inc maintain "buy" or better opinions. Plus, the average 12-month price target of $32.24 stands at a premium of 77% to GPRO's current price. Should the security extend its downward trajectory -- or should holiday sales disappoint, an unwinding of optimism among analysts could exacerbate selling pressure.
Wednesday, December 30, 2015
First Solar, Inc. (NASDAQ:FSLR) and Weight Watchers International, Inc. (NYSE:WTW) Calls
As mentioned in yesterday’s trade (NVIDIA), now is the time when portfolio managers will try to spice up their stock holdings to make themselves look good – and here are two more companies that fall into this category.
**OPTION TRADE 1: Buy the FSLR Jan 2016 70.000 call (FSLR160115C00070000) at approximately $0.90. Sell price is left to your own judgment.
First Solar, Inc. (NASDAQ: FSLR), has been one of a small number of solar companies to outperform the market in 2015. The company has improved its technology and leveraged a strong balance sheet and financial flexibility to provide consistent returns on solar projects at a time when most companies haven't been so consistent.
FSLR has returned nearly 41% in the past six-months. If that's not enough, the stock has outperformed the broader S&P 500 Index (SPX) by 46.4 percentage points over the last 60 sessions, and last Thursday hit an annual high of $67.80. The shares will open at $66.41 today.
There's still plenty of sideline cash available to fuel additional gains. Over 7% of First Solar, Inc.'s float is sold short, and would take more than four sessions to buy back, at average daily volumes. Future upgrades remain a possibility, too, with seven analysts rating the stock a "hold" or worse.
Moving ahead, 2016 could be a record year for First Solar as industry growth and First Solar's competitive position converge to create a solid position for investors.
In many ways, First Solar's growth is helped by the growing solar industry, and 2016 will be a massive growth year. According to GTM Research, U.S. solar installations are expected to grow from 6.2 GW in 2014 to over 7.1 GW in 2015 -- to an incredible 15 GW in 2016. And now with the recent investment tax credit extension the industry is now expected to grow to 20 GW by 2020.
Solar installment is experiencing a rush because of falling costs and falling costs lead to greater demand. That dynamic should lead to strong demand for First Solar's modules and solar projects both in 2016 and beyond.
When management recently announced 2016 guidance, it showed the improvements that are expected next year. Module efficiency is going to improve from 15.5% to 16.2%, and module production will grow 20% to 3.0 GW.
Expect First Solar to be a big winner of energy contracts, taking advantage of many weak competitors. With a strong balance sheet, improving efficiency, and a track record of predictable production to
sell to utilities, First Solar should be a big winner as a preferred energy partner in 2016. The biggest boost First Solar could have gotten was an ITC extension, which appears to be on the way in a recent budget compromise. But the company could also get a boost from emerging markets that are attracted to the low cost of solar energy.
**OPTION TRADE 2: Buy the WTW Jan 2016 23.000 call (WTW160129C00023000) at approximately $0.50. Sell price is left to your own judgment.
Weight Watchers International, Inc. (NYSE: WTW) is the top-performing stock over the past six months, with a gain of 285.2%. The shares are continuing upwards following the release of ads featuring investor and media mogul Oprah Winfrey.
Weight Watchers has received a buy rating for the short term, according to the latest rank of 2 from research firm, Zacks. The company received an average rating of 2.5 from 4 analysts.
The stock price is expected to reach $ 23.25 in the short term. The number of analysts agreeing with this consensus is 4, with the higher estimate for the short term price target is at $35.
Tuesday, December 29, 2015
NVIDIA Corporation (NASDAQ:NVDA) Calls
**OPTION TRADE: Buy the NVDA Jan 2016 33.000 call (NVDA160115C00033000) at approximately $1.00. Sell price is left to your own judgment.
NVIDIA Corporation (NASDAQ: NVDA), engaged in creating the graphics chips used in personal computers (PCs), sports a six-month return of more than 64%. Earlier this month, the shares hit a nearly eight-year high of 33.81, as well. Yesterday, the equity settled at $33.14.
Now is the time – as we approach the end of the quarter and the year -- when portfolio managers will try to spice up their stock holdings to make themselves look good. In a process known as "window dressing," mutual funds and other institutions buy outperformers and sell underperformers just before publicly disclosing their holdings. NVDA, with its impressive run this year, is definitely a candidate as an outperformer.
On top of this, while the technicals are impressive in and of themselves, NVDA could be further bolstered by an unwinding of negativity among option traders.
Adding to the bullish case, short interest on NVIDIA Corporation is heavy. Specifically, 40.5 million shares are sold short, representing nearly seven days of pent-up buying activity, assuming average volumes. In sum, the stock could be on the verge of a short-squeeze situation.
During the last several months analysts have commented on the company rating. Major Brokerage house, Canaccord Genuity upgraded its ratings on NVIDIA Corporation. In the latest research report, Canaccord Genuity raised the target price to $35 per share with a “Buy” rating, up from Hold rating on the shares.
Also, analysts at Zacks have given a short term rating of strong buy on NVIDIA Corporation with a rank of 1.