New Watch List Entries

CVS - CVS Health Corp

LGF - Lions Gate Entertainment


Active Watch List Candidates

ATVI - Activision Blizzard Inc.

DIS - The Walt Disney Co.

FEYE - FireEye, Inc.


Dropped Watch List Entries

GD and HSIC have graduated to our active play list.

STZ has been removed.



New Watch List Candidates:

CVS Health - CVS - close: 110.14

Company Info

Healthcare stocks have been strong performers this year. CVS is no exception with the stock up +14% year to date.

According to the company, "CVS Health is a pharmacy innovation company helping people on their path to better health. Through its 7,800 retail pharmacies, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs."

Their most recent earnings report was May 1st. CVS announced its Q1 results were $1.14 per share. That beat estimates by six cents. Revenues were up +11% to $36.33 billion, also above estimates. CVS did lower their Q2 guidance but left their 2015 forecast unchanged.

Wall Street loves a deal and CVS has been busy making deals. On May 21st the company announced they were buying Omnicare (OCR) for $12.7 billion. OCR is a pharmacy benefits provider to seniors citizens. This deal is expected to close by the end of 2015. CVS believes OCR will add 20 cents in earnings to their fiscal 2016. CVS CEO Larry Merlo commented on the deal, "The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel. It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic care patients."

CVS didn't stop there. On June 15th they announced a deal to buy all of the pharmacies inside Target stores (TGT). Here's an excerpt from the company's press release explaining the Target pharmacy deal:

CVS Health to acquire Target's pharmacy and clinic businesses for approximately $1.9 billion. Through this agreement, CVS Health will acquire Target's more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. Target's nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction. The new clinics will be part of CVS/minuteclinic's plan to operate 1,500 clinics by 2017. In addition, CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy.
Wall Street also reacted positively to the Target pharmacy news.

Rival pharmacy operator WBA reported earnings on July 9th that beat estimates by 15 cents and WBA raised their guidance. That should bode well for CVS who reports earnings on August 4th.

Shares of CVS are trading at all-time highs near $110. We don't want to chase it here. Tonight I am listing a buy-the-dip entry trigger to jump in on a pullback. Prior to the July rally the June high was $106.88. I'm suggesting a buy-the-dip trigger at $107.00.

Buy-a-dip trigger: $107.00, start with a stop loss at $103.40.

BUY the 2016 Jan $115 call (CVS160115C115) current ask $2.78

Option Format: symbol-year-month-day-call-strike

Chart of CVS:

Originally listed on the Watch List: 07/19/15


Lions Gate Entertainment - LGF - close: 37.85

Company Info

Have you ever wanted to trade the hype on a particular movie release? We might be able to do just that with LGF.

LGF is in the services sector. According to the company, "Lionsgate is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, new channel platforms, video games and international distribution and sales. Lionsgate currently has more than 30 television shows on over 20 different networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as the multiple Emmy Award-winning Mad Men and Nurse Jackie, the broadcast network series Nashville, the syndication success The Wendy Williams Show, the hit series Orange is the New Black, the critically-acclaimed drama Manhattan and the breakout series The Royals."

What that company description neglects to mention is the Hunger Games franchise. LGF makes the movies for the extremely popular franchise and the fourth and final movie is due to hit the U.S. market in November this year. Shares of LGF will likely rally into November as hype builds for the "Hunger Games: Mockingjay - Part 2" movie.

The stock already looks bullish with a rally from its May lows. Today shares are hovering near significant resistance in the $38.00 area and a breakout here should launch the next leg higher.

Tonight I am suggesting an intraday trigger to buy calls on LGF when shares hit $38.50. More conservative traders may want to use an alternative entry strategy and wait for a close above $38.25 instead. However, the most recent data listed short interest at 18% of the 99.0 million share float. A breakout past resistance near $38.25 could spark some short covering and we could miss our entry point.

I want to warn readers that LGF is scheduled to report earnings on August 6th. This is a risk should the company warn or miss estimates. Currently the point & figure chart is forecasting at $52.00 target. We will plan on exiting prior to the movie's release date in November.

Breakout trigger: Use an intraday trigger at $38.50
Start with a stop at $34.65.

BUY the 2016 Jan $40 call (LGF160115C40) current ask $1.94

Option Format: symbol-year-month-day-call-strike

Chart of LGF:

Originally listed on the Watch List: 07/19/15


Active Watch List Candidates:



Activision Blizzard, Inc. - ATVI - close: 25.81

Comments:
07/19/15: ATVI is hovering at all-time highs but just below resistance in the $26.00 area.

Currently the plan is to wait for ATVI to close above $26.15 and then buy calls the next morning.

Please note that ATVI could be volatile following its earnings report on August 4th. More conservative investors may want to wait until August 6th before considering new positions.

Trade Description: May 24, 2015:
Consumer spend more money on video games than they do at the movie theater. ATVI is the biggest with annual sales of $4.58 billion. Electronic Arts (EA) is hot on its heels with revenues of $4.52 billion a year.

ATVI is home to some of the biggest franchises in video game history. According to the company, "Activision Blizzard, Inc. is the largest and most profitable western interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty , Call of Duty Online, Destiny , Skylanders, World of Warcraft , StarCraft , Diablo, and Hearthstone: Heroes of Warcraft. Headquartered in Santa Monica, California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world."

Investors have been pretty forgiving when it comes to ATVI's recent earnings reports. On February 5th they beat the bottom line estimate but missed the revenue number. Revenues were down -2.6% from a year ago. ATVI blamed currency headwinds for the revenue miss since half of their sales are outside the U.S. and represent a significant chunk of their profits. Plus, the video game business is prone to lumpy quarters as sales rise and fall on new releases and expansions. Management lowered their Q1 and 2015 guidance.

ATVI just reported its Q1 results on May 6th. Earnings per share fell -15.7% from a year ago to $0.16 but that was actually 9 cents better than expected. Revenues fell again, this time down -8.9%. Management lowered their Q2 guidance but they raised their fiscal 2015 earnings guidance above Wall Street estimates. That was enough to send shares of ATVI higher. A few analysts have commented that ATVI's 2015 guidance is too conservative.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, commented on his company's quarterly results, "...This deepening level of engagement with a widening base of players across our franchises is what drove another successful quarter. We delivered better-than-expected Q1 results, increased our 2015 non-GAAP revenue outlook to $4.425 billion and earnings per share outlook to $1.20. Last quarter, on a non-GAAP basis, we delivered record higher-margin digital revenues of over half a billion dollars a Q1 record on an absolute basis and an all-time high on a percentage basis."

There were a number of headlines about how ATVI's Warcraft MMORPG saw its subscriber numbers fall from 10 million to 7.1 million in the last quarter. Investors don't seem to care. The Warcraft game is a cash cow but it's 11 years old. Investors could be looking forward.

ATVI said their new Destiny sci-fi shooter game and the Blizzard's fantasy card game have more than 50 million registered players (between them) with over $1 billion in sales.

ATVI also has several new titles coming out. They're on the verge of releasing "Heroes of the Storm", which will take on the current category champion "League of Legends" for the MOBA-style video game. More than ten million people have already signed up for the Heroes beta. ATVI has announced the next iteration of their Call of Duty franchise (CoD), which will be "Call of Duty: Black Ops III", which is another major cash-generating franchise. ATVI is also launching a new game called "Overwatch" and they'll release a new version of "Guitar Hero", which had 40 million players at its peak.

Currently shares of ATVI are up three weeks in a row and look a little bit overbought. Broken resistance near $24.00 should be significant support. Tonight I am suggesting a buy-the-dip trigger at $24.25 with a stop loss at $21.85.

trigger: Wait for a close above $26.15, then buy calls the next morning. Start with a stop loss at $23.65.

BUY the 2017 Jan $30 call (ATVI170120C30) current ask $1.79

07/12/15 new entry strategy: Wait for a close above $26.15, then buy calls
Use the 2017 Jan $30 call
06/28/15 adjust the entry trigger to $23.75 and the stop to $21.85.
06/21/15 move the stop loss to $22.85
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 05/24/15


The Walt Disney Co. - DIS - close: 118.86

Comments:
07/19/15: Shares of DIS continue to soar. The company had another strong opening weekend for its Marvel movie studio with the new Ant-Man movie.

I am still expecting DIS to see some profit taking relatively soon. Shares are currently hovering near a trend line of resistance (trend of higher highs). Plus the $120 level could be round-number resistance. We will wait for a pullback.

Currently our buy-the-dip trigger is $113.55. We may not get an entry point until after DIS reports earnings on August 4th.

Trade Description: June 28, 2015:
Scrooge McDuck isn't the only one with a wealth of riches these days. Long-term investors in DIS have been rewarded with big gains in recent years. From Mickey Mouse to the thousands of characters owned by Marvel to Pixar, everything DIS touches has turned to gold lately.

Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working. Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending. Analysts are forecasting DIS earnings to grow +17% this year.

The recent success of movie "Jurassic World", which was produced by Universal (not a Disney company), has generated even more excitement for DIS' upcoming Star Wars films. Jurassic World has broken all sorts of records and was the fastest movie to reach $1 billion in global box office sales. This has analysts expecting even bigger numbers from Star Wars. The next Star Wars film: "The Force Awakens" (episode seven), doesn't hit theaters until December 2015.

Morgan Stanley analyst Benjamin Swinburne is forecasting "Force Awakens" to do almost $2 billion in box office sales. This could boost DIS' bottom line by more than $1 billion. Plus the merchandising associated with Star Wars will bring a bountiful harvest for DIS too. Consumers spend close to $3 billion a year on licensed toys, clothing, and similar merchandise. The Star Wars movies will rake in the money in this category. DIS plans to release a Star Wars movie every year between now and 2020 (six more movies).

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares followed that rally with a six-week consolidation allowing DIS to digest its gains. A couple of weeks ago DIS started to rally again and broke through major resistance in the $112.00 area. Today the stock is at all-time highs.

Credit Suisse recently upped their price target to $130. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $160.00.

We want to be ready to take advantage of weakness in DIS due to any broader market sell-off. Just because stocks might plunge on the Greece debt story doesn't mean DIS' business is going to change. Any dip near support should be a buying opportunity. Tonight I am suggesting a buy-the-dip trigger at $111.00. We'll start with a stop loss at $107.00.

You could definitely play the 2016 calls but tonight I'm listing the 2017s.

Buy-the-Dip trigger @ $113.55 (use a stop at $107.00)

BUY the 2017 Jan $125 call (DIS170120C125)

07/12/15 adjust the trigger to $113.55
07/05/15 move the trigger to $112.00
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 06/21/15


FireEye, Inc. - FEYE - close: 48.07

Comments:
07/19/15: The weakness in FEYE last week was a surprise. Shares briefly traded above resistance near $50.00 on Monday but the rally failed. FEYE spent the week trending lower while the rest of the market was in rally mode. That's normally a bad sign.

Currently we are waiting for FEYE to close in the $50.25-51.25 range and then we'll buy calls the next morning.

FYI: FEYE is scheduled to report earnings on July 30th.

Trade Description: July 12, 2015:
We recently had FEYE on the LEAPStrader newsletter as a bullish candidate. The play was stopped out this past week thanks to the market's volatility and a stop loss that may have been a little too tight. FEYE recovered and now looks poised to resume its up trend.

I see last week's rebound as a new opportunity for bullish investors. Jump to the bottom of this play for new entry details.

Here's our previous play description:
The cyber attack on media giant Sony last year was headline news for weeks. It was a major warning bell for corporations around the world to spend more on cyber security. Today it still seems like every week we hear about some high-profile cyber attack. Online criminals and saboteurs are growing more sophisticated and that's fueling corporate demand for high-tech defenses.

The company describes itself as, "FireEye has invented a purpose-built, virtual machine-based security platform that provides real-time threat protection to enterprises and governments worldwide against the next generation of cyber attacks. These highly sophisticated cyber attacks easily circumvent traditional signature-based defenses, such as next-generation firewalls, IPS, anti-virus, and gateways. The FireEye Threat Prevention Platform provides real-time, dynamic threat protection without the use of signatures to protect an organization across the primary threat vectors and across the different stages of an attack life cycle. The core of the FireEye platform is a virtual execution engine, complemented by dynamic threat intelligence, to identify and block cyber attacks in real time. FireEye has over 3,100 customers across 67 countries, including over 200 of the Fortune 500."

The stock was a real high flyer in late 2013 and into 2014. Shares began to fade in early 2014 and then really got crushed when FEYE issued an earnings warning in May 2014. FEYE spent the rest of 2014 consolidating sideways in a very wide $25-40 trading range.

This year FEYE's stock has seen a reversal of fortunes. Suddenly shares are soaring and up more than +45% thanks to better than expected earnings results. FEYE's reported its 2014 Q4 results on February 11th. Earnings improved from a loss of 50 cents a year ago to a loss of 38 cents in the fourth quarter, which was eleven cents better than expected. Revenues soared a whopping +149% to $143 million, which was above expectations.

Management guided 2015 earnings and revenues essentially in-line with consensus. The company is forecasting revenues in the $605-625 million range. FEYE expects a 2015 loss of $1.80 to $1.90 per share. Gross margins are expected to be in the 71-75 percent range.

Analysts have expressed concern with the surge in FEYE's spending but management said they are spending in-line with the company's growth. FEYE CEO Dave DeWalt said FEYE saw its growth double in 2014 and is up tenfold in the last three years.

The trend of improving results continued in the first quarter of 2015. FEYE reported earnings on April 30th. Wall Street was expecting a loss of ($0.51) a share on revenues of $120.5 million. FEYE delivered a loss of ($0.48) per share. Revenues surged +69.5% to $125.4 million. Guidance was in-line with their prior forecast.

The results were good enough that multiple analysts firms have raised their price target on FEYE in the last month. Jim Cramer talks about cyber security stocks on his CNBC show last week. I don't watch Cramer's show but he essentially said that cyber security stocks like FEYE could be great long-term investments. He's probably right. Hacking attacks on corporations have been getting worse every year. They are not going away. It's a constant arms race between hackers versus security specialists. Cyber security is going to be a long-term need for every corporation big or small.

Meanwhile FEYE has seen great success with its cyber security subscription services. This is great for the company since they get recurring revenues and not a one-time sale. Management also believes they have a ton of opportunity overseas. Most of their sales are in the U.S. but cyber security is a global need.

(July 12th update): Last week FEYE dipped toward multiple layers of support and rebounded. Today the stock is hovering just below round-number resistance at $50.00. Tonight I am suggesting we wait for FEYE to close in the $50.25-51.25 range and then open bullish positions the next morning with a stop loss at $44.85.

We're not setting a target tonight but the point & figure chart is forecasting a long-term target of $85.00.

NOTE: FEYE is scheduled to report earnings on July 30th.

Breakout trigger: Wait for FEYE to close in the $50.25-51.25 range
Then buy calls the next morning with a stop at $44.85.

BUY the 2016 Jan $60 call (FEYE160115C60)

Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 07/12/15


Constellation Brands - STZ - close: 117.78

Comments:
07/19/15: STZ managed a gain for the week but shares are just not moving fast enough. The stock seems stuck in this $115-118 range. Plus there is additional resistance in the $120-122 area.

We are removing STZ as a watch list candidate.

Trade did not open.

07/19/15 removed from the watch list, suggested entry was a close in the $122-123 zone.
07/01/15 STZ reports Q1 earnings above estimates and raises 2016 guidance

Originally listed on the Watch List: 06/07/15