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Newsletter

Daily Newsletter, Saturday, 9/2/2017

Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

No Guarantee

by Jim Brown

Click here to email Jim Brown

Past performance is no guarantee of future results.

Weekly Statistics

Friday Statistics

Everyone expecting the typical August decline was frustrated when the minor 2.5% dip turned into a rebound that took the markets back to their highs. August has been down 5 of the last 7 years and up only 5 of the last 20 years. Those numbers have changed to 5 of 8 and 6 of 21 after the Nasdaq had its best week since the election.

The Nasdaq gained 87 points of 1.4% for the month but the index gained 207 points or 3.3% since the Tuesday morning low. That turned the markets around from weakness to strength as investors bought growth stocks instead of value stocks. Big cap techs and biotechs were the favorites with financials giving an assist on Friday.


Friday was a busy day for economics. The Nonfarm Payrolls were the big headline when they missed the consensus estimates. August produced 156,000 jobs compared to estimates for 185,000. However, August typically misses estimates for a variety of reasons including families trying to cram in a vacation and get the kids back into school. People put off looking for a job until after Labor Day. August headline numbers are normally revised higher by an average of 40,000 jobs.

Revisions to prior months were both negative. June was revised down from 231,000 to 210,000 and July was revised down from 209,000 to 189,000. The pace of job creation has slowed slightly with the three-month average now 185,000. The challenge is the lack of qualified applicants. There are plenty of job openings as we saw in the last JOLTS report with 6.163 million openings. Unless you want to work in a bar, restaurant or construction, the requirements are a higher level of education and computer literacy on a higher level. Being able to type misspelled Facebook posts in a hurry is not a qualification.

The unemployment rate rose one tenth to 4.4% with the broader U6 rate at 8.6%. Only 77,000 people joined the labor force in August compared to 355,000 on average over the prior two months.

Goods producing industries, including construction, manufacturing and mining/energy added 70,000 jobs. Private services added 95,000 but a big drop from the 179,000 in July. Government posted a loss of 13,000 jobs. Healthcare added 16,600 jobs and that sector will continue to grow as the baby boomers gradually lose their health.

The disaster on the Gulf coast will be a hit to jobs in the short term as companies that were damaged lay off workers until they can rebuild. In the long term, it will add to jobs because the rebuilding effort will last for years.


The drop in government payrolls caused a tick lower in the Atlanta Fed real time GDPNow forecast for Q3. The forecast is now 3.2% growth but we still have all the reports in September to factor into the mix.


The ISM Manufacturing Index surprised with a stronger than expected reading. The index rose from 57.2 to 58.8 compared to analyst estimates for a decline to 56.2. This was the highest reading since 2011. Customer inventories declined from 49.0 to 41.0 suggesting stronger orders in the future. The rise in manufacturer inventories from 50.0 to 55.5 will add to GDP growth for Q3. Twelve of the 18 industries reported growth and only 4 reported a decline in orders. Those were food/beverage, metals, apparel and furniture.

Order backlogs rose from 55.0 to 57.5 and the highest level since March. New orders eased off some from the 63.5 high in June but remained over 60 for the third consecutive month.

The hurricane will weigh on the manufacturing sector initially as plants in Texas recover. However, there could be a shortage of raw materials, especially chemicals used in the manufacture of plastic items. Long term, there will be higher demand for products as damaged items are replaced.



One area where manufacturing could surge immediately is autos. Analysts believe between 500,000 and one million cars/trucks have been destroyed by the flooding. The cars are not recoverable because they will quickly rust and mold. Insurance companies will take months to process all the claims but 30-60 days from now, there will be a surge in new car purchases.

Progressive, said they have as many as 500,000 insured cars in the flood area. They do not know how many of them were actually in the flood but the stock is getting hammered by investors fleeing a normally strong company.

Warren Buffett's Geico Insurance unit also has 500,000 insured cars in the area. Buffett said earlier in the week it would be some time before they knew how many claims would be generated. He said they had plenty of capital and would not cause any problems other than a temporary drop in earnings.

He may also have exposure through his reinsurance units, General RE and Berkshire Hathaway Reinsurance. They provide backup insurance for the other front line companies.


The final reading on Consumer Sentiment for August dipped slightly from the initial number at 97.6 to 96.8. That was still well above the 93.4 in July and the largest monthly gain since December. The present conditions component declined from 113.4 to 110.9. The expectations component rose sharply from 80.5 to 87.7. Business sentiment rose from 50 to 56. Overall economic expectations rose from 48 to 54. The hurricane will likely depress sentiment slightly in September but it should rebound quickly once the headlines disappear.


Construction spending for July declined -0.6% after a -1.4% drop in June. Analysts were expecting a 0.5% rise. This was the third decline in 4 months and spending is now 5.6% below July 2016 levels.

The calendar for next week is busy but there is only one report that traders will be watching with interest. The Fed Beige Book report on each of the Fed districts always draws attention but after the strong ISM report on Friday, there is little worry there will be any negative surprises.

There is a lot of Fedspeak this week. Apparently the Fed heads are getting it out of the way before the quiet period begins ahead of the Sept 20th FOMC decision.


CoreLogic is predicting $40 billion in damage for Harvey but insured losses of only $25 billion. Most standard homeowner policies do not cover floods so they will not have to pay claims. The bulk of insured losses will be to businesses and personal auto policies, which normally cover water damage. The actual wind damage was severe in Rockport, a town of 10,000 but was minimal in the Houston area where the majority of the damage was flooding.

Allstate (ALL) has the second-largest homeowner insurance coverage in Texas with a 13% market share. They would cover the first $500 million themselves but have reinsurance for everything over that amount.


There was some good news for Houston on Saturday. Hurricane Irma's mostly likely track has turned north of Puerto Rico and Cuba and will likely hit the East Coast and not enter the Gulf of Mexico. The track could still change but this is the most likely path as of 5:PM on Saturday. This is a category 3 storm with 120 mph winds but is expected to strengthen when it reaches the warmer shallow water.


Apple (AAPL) confirmed its September 12th product announcement and product leaks are becoming a daily event. The names of the new phones were leaked by case manufacturers. There will be an iPhone 8, iPhone 8 Plus and the iPhone Edition, which will be the $1,000 OLED version. Those names came from 9to5Mac, a company that routinely provides quality product leaks. However, iCulture disputed that Edition name claiming it will be called iPhone X. Apple is jumping from the 7 to 8 rather than have the "S" model revisions because they believe the changes are too dramatic for it to be just an upgrade. The screens have been reformatted with no home button and they have wireless charging among some other new features.

Apple shares have been listless for the last couple days. They typically decline a couple days before the announcement on a sell the news trade. With the event still a week away, it is a little early for the weakness but the trend is so well known, there are probably sellers jumping the gun. Apple shares did close at a new high for the last three days but only with minor gains.


Dow (DOW) and DuPont (DD) completed their merger and the combined companies now trade under the symbol DWDP and the name DowDuPont. The new company replaced DuPont in the Dow as of Friday. They announced the merger in December 2015 and the combined companies will eventually break apart into three separately traded entities. That split is expected to happen over the next 18 months and will separate the agriculture, materials science and specialty products divisions.

Dan Loeb of Third Point is on a mission to force DowDuPont to split into more than three companies with the specialty products division alone splitting into four companies because of the diversity of their products. The combined companies have a market cap of $156 billion. Once shares have found a range and built some history, I would be a long-term buyer because the splits will create future value.


Lululemon (LULU) reported earnings of 39 cents that beat estimates for 35 cents. Revenue rose 13% to $581.1 million and beat estimates for $567.0 million. Same store sales rose 7%. The company said analysts warning that athleisure was fading was a misrepresentation. The company is succeeding because they have expanded from yoga pants into multiple lines of attire including a new line of bras that have been successful. They have also been successful in other sports lines including running clothes. Cowen reiterated an outperform with a $68 price target. Shares rose 7%.


Palo Alto Networks (PANW) reported adjusted earnings of 92 cents that beat estimates for 79 cents. The company beat its own guidance for 78-80 cents. Revenue rose 27% to $509.1 million, which also beat estimates for $488 million. Palo Alto guided for 2018 for revenue of $2.125-$2.165 billion and the first time to break $2 billion. They guided for earnings of $3.24-$3.34. Analysts were expecting $2.13 billion and $3.27. They added 3,000 customers in the quarter, the most ever, to total 42,500. Free cash flow was $190 million with $2.2 billion cash on hand. They also announced the CFO was retiring. Shares rallied $14 on the report.


Ambarella (AMBA) reported adjusted earnings of 48 cents that beat estimates for 44 cents. Revenue rose to $71.6 million and beat estimates for $70.7 million. They guided for Q3 for revenue of $87.5-$90.5 million and analysts expected $88.8 million. During the conference call, the CFO warned that revenue could be impacted by lower prices, which cuts market share for the higher priced drones with Ambarella video. They also warned there was a shortage of memory components that could impact camera build schedules. Shares were knocked for a 22% loss.


Nutanix (NTNX) reported a loss of 33 cents that beat estimates for 38 cents. Revenue of $226 million beat estimates for $218 million. The cloud vendor guided for current quarter revenues of $240-$250 million and well over estimates for $232 million. They guided for a loss of 37 cents that matched estimates. Shares spiked $2 at the open but fell back to close flat.


The Q2 earnings cycle is over. Only 2 S&P companies are left to report and those are this week. Of the 498 companies reported, 73.3% have beaten on earnings and 59.2% have beaten on revenue. The blended earnings growth for Q2 was 12.1%. There have been 66 guidance warnings and 45 guidance raises. The forward PE is now 17.9 and the highest since the financial crisis rebound. Hewlett Packard, HD Supply and Dell Technologies are the big dogs for the week.


Stifel's John Baugh wrote that all types of building supply companies could benefit from the hurricane. His best picks were Home Depot (HD) and Lowes (LOW) saying HD saw $550 million in increased sales from Hurricane Sandy. The gains were weighted in the first two quarters but carried on for the next two quarters as well.

He said flooring companies like Mohawk (MHK) and Lumber Liquidators (LL) could see a surge in demand from ruined carpets and warped flooring. He also discussed USG (USG) and Eagle Materials (EXP) because of wallboard and sheetrock demand from water damage. Both companies have larger exposure to the south. He warned that Aaron's (AAN), Conn's (CONN) and Rent-A-Center (RCII) could be hurt because of store closures and from people failing to make payments on waterlogged furniture and electronics. The companies have insurance on the furniture in case it is damaged but there would still be a protracted loss process.

A Wells Fargo analyst warned about expecting too much on the auto replacement scenario. He did the math and said he expects 115,000 new cars to be sold in the Houston area. Group 1 Automotive (GPI) has 23 locations. Autonation (AN) has the second most dealerships in the area at 14. However, not everyone can afford a new car and with the average age of a used car at 11 years, consumers are only going to get a small insurance check for their destroyed car. It will not be enough to actually replace the car with something similar to what they owned because high demand will lift prices on used cars. The auto manufacturers and rental companies have said they are going to ship thousands of "off lease" and end of life rental cars to Houston in hopes of finding a hot market for used cars.

WTI prices fell early in the week as refineries began to go offline and it was apparent inventories were going to rise sharply without offsetting refinery demand. As news of some refinery restarts hit the market on Thursday, prices began to rise off the lows but the inventory reports over the next two weeks are not going to be pretty. Some refineries have restarted, some will be back online within two weeks but a couple could be offline for a month.


The gasoline shortage was very bad in Texas. On Wednesday, there were only 13 stations in the Houston area with gasoline. On Saturday morning, there were more than 100. Tankers are coming in from all along the coast to cover the shortage. Maps from http://tracker.gasbuddy.com/.

Wednesday Gasoline Availability

Saturday Gasoline Availability

Natural gas prices rose sharply the last two days because some of the Gulf production has been offline because of Harvey and the injections into storage have been low. The injection last week was only 30 Bcf to bring the total to 3,155 Bcf. That is only 8 Bcf over the five-year average and -239 Bcf below year ago levels. The ramp of LNG production for export plus the accelerating conversion from coal to gas for electric generation, is consuming more gas per day than in the past. We have plenty but at the recent $2.85-$2.90 average price there is no real incentive to drill. Producers are drilling at a slow pace to save money and just replace the gas lost to production/depletion. Active gas rigs have been flat around 180 for months. Once gas demand pushes prices back over $3.50 the activity will increase.




Markets

The markets are rebounding on the idea that the disaster could unite lawmakers in Washington. The odds are good they will try to package the budget bill, debt ceiling increase and hurricane relief all in one bill. Some would not want to vote for it because of the items in the budget portion but they would be afraid to vote against any bill that has hurricane relief in the tile. This is an opportunity for lawmakers on both sides to get some of what they want while accepting some items they do not want. It would be a win-win for everyone to get it passed early while the disaster is on everyone's mind and still in the headlines.

There is also the North Korean problem. Investors have realized there are no options except for bad ones. Outside countries cannot attack because Kim Jong-Un is holding a trump card with 21,000 artillery pieces aimed at Seoul South Korea with 20 million people in the cross hairs. Japan, the U.S. and the UN can whine all they want but their only option is more sanctions. That takes the North Korean headlines out of the equation for the market. There may be continued knee jerk reactions to headlines but there is no option for action.

Unfortunately, we learned over the weekend that North Korea warned the missile test over Japan was only a prelude to an attack on Guam. They also released a photo of what they said was a thermonuclear warhead they were planning on using on their ICBMs. North Korea actually demonstrated loading the bomb into a nose cone of their Hwasong-14, which can hit the USA. More concerning for those that understand the threat, the Korean Central News Agency warned the "thermonuclear nuke with great destructive power can be detonated even at high altitudes for a super powerful Electromagnetic Pulse (EMP) attack." North Korea has reportedly completed preparations for a high yield nuclear test at the Punggye-ri test site. The test is expected on September 9th, which is the country's anniversary.


The S&P rebounded 48 points from Tuesday's low at 2,428 and stopped just short of new high resistance at 2,480. That was a 2% rebound in four days. As we move into the most volatile month of the year, that prior resistance high could be a formidable wall or eventual support if there is a sudden post holiday sprint higher.

With volume of only 5.1 billion shares on Friday, the conviction was light. We had a three-day weekend for headlines to appear. Earnings are over with only 2 S&P companies left to report. This will be a week for direction to appear and the 2,480 level will be the line in the sand.


The Dow rallied again in a thin market thanks to financials and a broad cross section of companies with only a few losers. The peak at 22,038 came about 12:30 and the index faded as the day progressed with a sharp 32-point decline in the last few minutes. That was probably profit taking from the four days of gains ahead of the weekend event risk.

Resistance is now 22,000 and initial support back at 21,775. The Dow rebounded 365 points in four days from Tuesday's opening low at 21,673 to Friday's high at 22,038. That is a good run and was enough to turn the index positive for the month with a 57-point gain for August as of Thursday's close.



The Nasdaq Composite rebounded 207 points from Tuesday's opening low at 6,228 to Friday's record high close at 6,435. That is a 3.3% rebound in only 4 days. That moved the Nasdaq from a bearish chart to a bullish chart if the index can break over the intraday high from July 27th at 6,460.84. There is always the possibility for a double top to form if that resistance holds.

We are moving into the most volatile month of the year when portfolio managers restructure their portfolios after Q2 earnings and before the best six months of the year, which begin on November 1st. While I would like to believe the Nasdaq will continue higher, the minor weakness in the big cap techs on Friday and the minor decline in the Nasdaq 100 Index, give me a reason to be cautious. I believe it was just weekend event risk caution but we should always be aware of resistance after a big move.





The small cap Russell 2000 is outperforming the rest of the market. The Russell has been up for 7 consecutive days and broke through resistance at 1,388 and 1,400. This should be bullish for market sentiment. The Russell was being lifted by biotechs and financials.


The major indexes were bearish heading into last week. The NK missile over Japan was an opportunity for the bears to seize control and force the market lower. They were unable to do it and once investors realized there was no option to deal with NK they bought the dip. Add in the expectations for a bipartisan budget, debt ceiling, hurricane relief bill in Washington and constant chatter about tax reform and suddenly the bears were running for cover.

This is going to be a pivotal week. If those talking points remain at the front of the conversation, the market could move higher. However, if lawmakers start talking down a combination bill and the threat of a government shutdown increases then the market will take note. The president has had a good week with the disaster headlines taking precedence over political headlines. If he can stay out of trouble and continue pressing his agenda, the market would react positively.

We are entering the most volatile month of the year but every seasonal trend has failed in 2017. I would be thrilled if this one failed as well.

If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Do not wait until you miss a newsletter to decide you want to take the plunge.

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Random Thoughts


The market has returned to its highs but the number of bulls is shrinking. On a contrarian basis that is bullish but it is still concerning. 75% still believe the market is not going higher.



Effective Tuesday there is a big change in the way trades are settled. Starting Tuesday trades will be settled in 2 days instead of 3. A trade executed on Tuesday will be settled on Thursday. This applies to stocks, corporate and municipal bonds, unit investment trusts and financial instruments composed of those security types. The EU, Hong Kong and South Korea have already switched. Canada, Mexico and Peru will also switch on Tuesday.

Proceeds from a transaction will be available for withdrawal two days after the trade rather than three.

Visit the T2 settlement website for a complete list of the changes.


Dr David Cass interviewed Warren Buffet. There are some really interesting thoughts in the entire interview. In one response he refers to winning the "Ovarian lottery."

Cass: How has your understanding of markets contributed towards your political views?

WB: I would not say knowledge of markets has. My political views were formed by this process. Just imagine that it is 24 hours before you are born. A genie comes and says to you in the womb, "You look like an extraordinarily responsible, intelligent, potential human being. Going to emerge in 24 hours and it is an enormous responsibility I am going to assign to you - determination of the political, economic and social system into which you are going to emerge. You set the rules, any political system, democracy, parliamentary, anything you wish, can set the economic structure, communistic, capitalistic, set anything in motion and I guarantee you that when you emerge this world will exist for you, your children and grandchildren. What’s the catch? One catch - just before you emerge you have to go through a huge bucket with 7 billion slips, one for each human. Dip your hand in and that is what you get - you could be born intelligent or not intelligent, born healthy or disabled, born black or white, born in the US or in Bangladesh, etc. You have no idea which slip you will get. Not knowing which slip you are going to get, how would you design the world? Do you want men to push around females? It is a 50/50 chance you get female.

If you think about the political world, you want a system that gets what people want. You want more and more output because you will have more wealth to share around. The US is a great system, turns out $50,000 GDP per capita, 6 times the amount when I was born in just one lifetime. But not knowing what slip you get, you want a system that once it produces output, you do not want anyone to be left behind. You want to incentivize the top performers, do not want equality in results, but do want something that those who get the bad tickets still have a decent life. You also do not want fear in people's minds - fear of lack of money in old age, fear of cost of health care. I call this the "Ovarian Lottery". My sisters did not get the same ticket. Expectations for them were that they would marry well, or if they work, would work as a nurse, teacher, etc. If you are designing the world knowing 50/50 male or female, you do not want this type of world for women - you could get female. Design your world this way; this should be your philosophy. I look at Forbes 400, look at their figures and see how it has gone up in the last 30 years. Americans at the bottom are also improving, and that is great, but we do not want that degree of inequality. Only governments can correct that. Right way to look at it is the standpoint of how you would view the world if you did not know who you would be. If you are not willing to gamble with your slip out of 100 random slips, you are lucky! The top 1% of 7 billion people. Everyone is wired differently. You cannot say you do everything yourself. We all have teachers, and people before us who led us to where we are. We cannot let people fall too far behind. You all definitely got good slips.

Cass: What was the most difficult negotiation you were ever involved in? How did you develop your strategy going in?

WB: Only really learned negotiations from my dad. People have different styles of negotiation. I do not want to be in a negotiation where it "has to end" at some point. I do not want them to have me by the throat while I have them by the throat. Either we give up or one strangles the other. My style is different from most peoples, just say what I do. If you do that throughout your life then stick to it. I can walk away from anything. I say I will pay $X, and normally this is the best deal. I do not want to lowball, then you counter, and get to $X anyway. You spend time and money doing that. I just say what I will pay, and that works fine once you establish a reputation. You do not want to get in a negotiation that you cannot afford to walk away from. Bargaining with people you love is a terrible mistake. It is destructive. The most powerful force in the world is unconditional love.

Full Interview




 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

 

"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."

Mark Twain


 


New Plays

Record Quarter Ahead

by Jim Brown

Click here to email Jim Brown
Editor's Note

Analysts have it wrong and this company is excited about its growth. Ciena's CEO said analysts are not looking at the bigger picture.



NEW BULLISH Plays

CIEN - Ciena Corporation - Company Profile

Ciena Corporation provides equipment, software, and services that support the transport, switching, aggregation, service delivery, and management of voice, video, and data traffic on communications networks worldwide. The company's Networking Platforms segment offers hardware networking solutions optimized for the convergence of coherent optical transport, optical transport network switching, and packet switching. Its products include 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, Waveserver stackable interconnect system, CoreDirector Multiservice Optical Switches, and OTN configuration for the 5410 Reconfigurable Switching System, as well as Z-Series Packet-Optical Platform; 3000 family of service delivery switches and service aggregation switches, and the 5000 family of service aggregation switches, as well as 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch; and 4200 Advanced Services Platform, Corestream 5100/5200 Advanced Services Platform, Common Photonic Layer, and 6100 Multiservice Optical Platform. This segment also sells operating system software and enhanced software features embedded in each of these products. The company's Software and Software-Related Services segment offers network management solutions, including the OneControl Unified Management System, ON-Center Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release, and Planet Operate; and Blue Planet network virtualization, service orchestration, and network management software platform, as well as related installation, support, and consulting services. Its Global Services segment provides consulting and network design, installation and deployment, maintenance support, and training services. Company description from FinViz.com.

Ciena reported earnings of 51 cents that beat estimates of 49 cents. Revenue rose 9% to $728.7 million and beat estimates for $726.9 million. Gross margins were 45% with an 11.3% operating margin. They ended the quarter with $854.1 million in cash and generated free cash flow of more than $50 million. Shares were knocked for a 15% loss on the news.

They guided for Q3 revenue of $720-$750 million and a record quarter. Analysts were expecting $766 million.

The CEO talked to a Barron's analyst after the earnings call and was very upbeat. He said we are still in bullish mode with 7% annual growth and 5% growth in North America. Compound growth over the last five years is 9%. The Q3 guidance takes into account two factors. Government spending overall has slowed. That means less spent on networking equipment. Secondly, Tier One telecom operators get a lot of government business and the slowing government spend has affected them as well. There has been a lot of regional M&A that is being digested. This impacts the entire networking market not just Ciena. We are still predicting 7% growth and a record quarter despite the temporary government slowdown.

Piper Jaffray reiterated an overweight rating saying they understood the government and regional provider problem and Ciena had a lot of positive signs despite this government slowdown. Ciena is executing well, new product acceptance is good. We believe Ciena is the best positioned system supplier for the two hottest segments of the optical market.

Citi upgraded from neutral to buy. Doughtery reiterated a buy and $27 price target.

Earnings Nov 30th.

Shares declined after earnings to support at $21.50 and rebounded 2% on Friday.

Buy CIEN shares, currently $22.06, initial stop loss $20.85.
Alternate position: Buy Nov $23 call, currently 90 cents. Initial stop loss $19.85.



NEW BEARISH Plays

No New Bearish Plays


Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps more than $1.00 at the market open.



In Play Updates and Reviews

Dead Stop

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Nasdaq closed at a new high but the Dow and S&P came to a dead stop at resistance. The Nasdaq extended its new high by 6 points and the Russell extended its winning streak to 7 days. However, the Dow and S&P stalled exactly at resistance. The Russell was up on the strength in the financial sector, which represents 17% of the Russell weighting. The small cap index is stretching its luck after 7 days of gains.

The bullishness over the last several days was unexpected in a normally weak period. September is the most volatile month of the year and that starts next week. It should be interesting.





Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.




Lottery Ticket Plays - Updated only on Weekends


Current Position Changes


No Changes



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BULLISH Play Updates

KTOS - Kratos Defense - Company Profile

Comments:

No specific news. Flat for the day with a penny gain but still a new high.

Original Trade Description: August 14th.

Kratos Defense & Security Solutions, Inc. provides mission critical products, solutions, and services in the United States. The company operates through three segments: Kratos Government Solutions, Unmanned Systems, and Public Safety & Security. The Kratos Government Solutions segment offers microwave electronic products; satellite communications; technical and training solutions; modular systems; and defense and rocket support services. The Unmanned Systems segment provides unmanned aerial, ground, and seaborne, as well as command, control, and communications systems. The Public Safety & Security segment designs, engineers, deploys, operates, integrates, maintains, and operates security and surveillance solutions for homeland security, public safety, critical infrastructure, government, and commercial customers. The company serves national security related agencies, the department of defense, intelligence agencies, and classified agencies, as well as international government agencies and domestic and international commercial customers; and critical infrastructure, power generation, power transport, nuclear energy, financial, IT, healthcare, education, transportation, and petro-chemical industries, as well as government and military customers. Kratos Defense & Security Solutions, Inc. was founded in 1994 and is headquartered in San Diego, California. Company description from FinViz.com.

Kratos builds drones for target practice for the U.S. military. They are also building drones for combat for air to air and air to land. They also provide communication systems for missiles, satellites and various other platforms.

China and Russia are rapidly militarizing space and Kratos is working with the U.S. military to improve satellite communication to defend against attacks. The DoD is currently spending a lot of money to prepare for war in space. Kratos owns and operates a global satellite demonitoring business with revenues rising 61% in Q1.

Kratos has so many new programs in operation it would be impossible to list them here and several of them are secret programs for unnamed clients.

Kratos guided for a return to profitability in Q2 and sharply rising revenue for the full year. Shares spiked 30% in the four weeks after Q1 earnings. Their next report is August 3rd. I am recommending we buy an option and hold over the report. If the earnings are as positive as they teased in the Q1 report we could see another sharp reaction. This company is in all the right places for the increase in defense department spending.

Kratos unveiled its newest high performance class of military unmanned aerial system technology at the Paris Air Show. The XQ-222 Valkyrie and UTAP-22 Mako drones provide fighter like performance and are designed to function as wingmen to manned aircraft in contested airspace. The Valkyrie can carry various weapons and intelligence systems and has a range of 3,000 miles. The Mako is designed to carry sensors and stealthily infiltrate hostile airspace to gather intelligence. Both are designed to operate with or without manned flights. The Air Force recently pitched the functions of the Valkyrie saying a F-35 with a group of fighter/bomber drones could maximize control of airspace and ground attack operations. The F-35 can select targets and pass information to specific drones while maintaining situational awareness from a stealthy and relatively safe position.

Just over the last couple weeks Kratos announced a $2.9 million order for an airborne communications system, a $10 million order for a ballistic missile defense system, $23 million for a military radar system and $8 million for a GPS Satellite protection system. Analysts are expecting a record $800 million in revenue for 2018. They expect to do $150 million in unmanned revenues in 2018.

Kratos posted earnings of 1 cent and a $10.4% increase in revenue to $186 million. They guided to be free cash flow positive by $25 million in 2017.

Expected earnings Oct 26th.

With the daily new contract awards shares have risen $1.50 in the last week and closed at a 5-week high on Monday. They are very close to breaking out to a new high.

Position 8/15/17:

Long KTOS shares @ $12.78, see portfolio graphic for stop loss.
Alternate position: Long Nov $15 call @ 65 cents, see portfolio graphic for stop loss.

With shares just crossing the $12.50 strike price, we had to reach out to $15 and a distant month.



MRVL - Marvel Technology - Company Profile

Comments:

No specific news. Minor 6 cent decline from the new high.

Original Trade Description: August 30th.

Marvell Technology Group Ltd. designs, develops, and markets analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. It offers a range of storage products, such as hard disk drive (HDD) and solid-state drive controllers, as well as HDD components, such as HDD preamps components; and develops software enabled silicon solutions consisting of serial advanced technology attachment port multipliers, bridges, serial attached SCSI, and non-volatile memory express redundant array of independent disks controllers and converged storage processors for enterprise, data centers, and cloud computing businesses. The company also provides networking products comprising Ethernet solutions comprising Ethernet switches, Ethernet physical-layer transceivers, and single-chip network interface devices; and embedded communication processors. In addition, it offers a portfolio of connectivity solutions, including Wi-Fi, and Wi-Fi/Bluetooth integrated system-on-a-chip products, which are integrated into a variety of end devices, such as enterprise access points, home gateways, multimedia devices, gaming products, printers, automotive infotainment and telematics units, and smart industrial devices. Further, the company provides printer-specific standard products, as well as full-custom application-specific integrated circuits; and communications and applications processors. Company description from FinViz.com.

Marvel reported earnings of 30 cents that beat estimates for 28 cents. Revenue of $605 million beat estimates for $601 million. Free cash flow more than doubled from $38 million to $89 million. Core revenues rose 6%, storage controller revenues rose 13%. SSD chips rose from 20% to 25% or revenue. The new SSD products are rapidly gaining market share and remain a high profit item. Gross margin was 60.4%. They guided for Q3 for revenue of $595-$625 million with earnings of 30-34 cents per share.

Expected earnings Nov 23rd.

The company is in the midst of a restructuring process while they are changing their product mix for the better. Apparently it is working.

Shares spiked from $15.75 to $17.25 after earnings then pulled back slightly on post earnings depression. They rebounded today to a new 2-month high and very close to a new high.

Position 8/31:

Long MRVL shares @ $17.79, see portfolio graphic for stop loss.
Alternate position: Long Oct $18 call @ 64 cents, see portfolio graphic for stop loss.



SYMC - Symantec - Company Profile

Comments:

No specific news. Minor decline but holding the recent gains.

Original Trade Description: August 26th.

Symantec Corporation, together with its subsidiaries, provides cybersecurity solutions worldwide. It operates through two segments, Consumer Digital Safety and Enterprise Security. The Consumer Digital Safety segment provides Norton-branded services that provide multi-layer security services across desktop and mobile operating systems, public Wi-Fi connections, and home networks to defend against online threats to individuals, families, and small businesses. This segment also offers LifeLock-branded identity protection services, such as identifying and notifying users of identity-related and other events, and assisting users in remediating their impact; and digital safety platform designed to protect information across devices, customer identities, and the connected homes and families. The Enterprise Security segment provides endpoint protection products, endpoint management, messaging protection products, information protection products, cyber security services, Website security, and advanced Web and cloud security offerings. Its enterprise endpoint, network security, and management offerings supports evolving endpoints and networks, as well as provides an integrated cyber defense platform. This segment delivers its solutions through various methods, such as software, appliance, software-as-a-service, and managed services. The company serves individuals, households, and small businesses; small, medium, and large enterprises; and government and public sector customers. Company description from FinViz.com.

Symantec is the largest provider of security products for retail buyers. They have an excellent suite of firewalls and antivirus programs. I have used everyone in the market at one time or another and Symantec has always been the best for me.

Last week they announced something different. They announced a secure router that handles everything in your house. It has special security for smartphones, tablets, PCs, IoT devices, etc. It has a handy user friendly interface and you can set at the router level, individual passwords for everyone in the family with individual settings by password. Say you have a 12 year old boy in the house. You can set different parental exclusions for him than you would for an 8 year old in the same house. You are in charge of everyone's access regardless of what device they are using.

The secure router blocks attacks before they get to your PC and before Windows has to deal with them. The router is not cheap but compared to what it does, it is cheap for the number of functions. How much does it cost to have your PC compromised? The router is $300 and comes with a year of service. After the year is up it goes to $10 a month. That is an entirely new revenue stream for Symantec. Obviously, it will not show up in their earnings for several quarters but the stock is rising on the news.

You can read the full press release HERE.

Expected earnings Nov 1st.

The stock is at the upper end of the range that I recommend in Premier Investor. With the potential for volatility in September, I am not recommending we go long the shares. This will be an option only position so we can try and ride out some of the volatility with minimum risk.

Update 8/28: Symantec said over the weekend they have identified a sustained cyber spying campaign, likely state sponsored, against Indian and Pakistani entities. The espionage effort began in October. India, China and Pakistan have raised military readiness over the last several weeks.

Position 8/28/17:

Long Oct $31 call @ 48 cents, see portfolio graphic for stop loss.


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BEARISH Play Updates

DF - Dean Foods - Company Profile

Comments:

No specific news. Holding at the 5-year lows.

Original Trade Description: August 9th.

Dean Foods Company, a food and beverage company, processes and distributes milk, and other dairy and dairy case products in the United States. The company manufactures, markets, and distributes various branded and private label dairy case products, such as fluid milk, ice creams, cultured dairy products, creamers, ice cream mixes, and other dairy products; and juices, teas, bottled water, and other products. It sell its products under approximately 50 national, regional, and local proprietary or licensed brands, and private labels, including DairyPure, TruMoo, Alta Dena, Berkeley Farms, Country Fresh, Dean's, Friendly's, Garelick Farms, LAND O LAKES, Lehigh Valley Dairy Farms, Mayfield, McArthur, Meadow Gold, Oak Farms, PET, T.G. Lee, Tuscan, and others. The company sells its products to retailers, distributors, foodservice outlets, educational institutions, and governmental entities through its sales forces. Company description from FinViz.com.

Dean Foods reported earnings of 21 cents that declined -47.1% and missed estimates for 31 cents. Revenue of $1.93 billion, which also missed forecasts. The lowered their full-year guidance from $1.35-$1.55 to 80-95 cents. That is a major haircut.

Expected earnings Nov 8th.

Dean Foods handles a lot of milk brands and the USDA said milk sales nationwide declined -2.9% in May alone. Management said competitive and volume pressures are hurting the company and the negative dynamics are expected to continue the rest of the year.

Milk has been found to cause diabetes or at least make it worse and the news is spreading fast. I have a friend that has been taking insulin for 20 years. I talked him into dropping milk from his diet and he was able to get off insulin within 3 weeks. A year later he backslid and began to drink milk again and he had to go back on insulin. He was quickly convinced and has sworn off forever and now leads a normal life with no diabetes meds.

Shares fell sharply to a 5-year low but given the severity of the guidance warning and the size of the earnings miss, the stock could continue to decline.

Position 8/10/17:

Short DF shares @ $11.37, see portfolio graphic for stop loss.
Alternate position: Long Sept $11 put @ 30 cents, see portfolio graphic for stop loss.



SABR - Sabre Corp - Company Profile

Comments:

No specific news. Still fighting resistance at $18.50.

Original Trade Description: August 5th.

Sabre Corporation, through its subsidiary, Sabre Holdings Corporation, provides technology solutions to the travel and tourism industry worldwide. It operates through two segments, Travel Network, and Airline and Hospitality Solutions. The Travel Network segment operates as a business-to-business travel marketplace that offers travel content, such as inventory, prices, and availability from a range of travel suppliers, including airlines, hotels, car rental brands, rail carriers, cruise lines, and tour operators with a network of travel buyers comprising online and offline travel agencies, travel management companies, and corporate travel departments. The Airline and Hospitality Solutions segment provides a portfolio of software technology products and solutions through software-as-a-service and hosted delivery models to airlines, hoteliers, and other travel suppliers. This segment offers SabreSonic Customer Sales & Service, a reservation system that provides capabilities around managing sales and customer service across an airline's diverse touch points; Sabre AirVision Marketing & Planning, a set of airline commercial planning solutions; and Sabre AirCentre Enterprise Operations, a set of solutions for planning and management of airline, airport, and customer operations. The Airline and Hospitality Solutions segment also provides software and solutions to hoteliers through SynXis, a central reservation system; SynXis Property Manager Solution for property management; and marketing, professional, and revenue management services. Company description from FinViz.com.

American Airlines founded the company in 1960 and spun it off in 2000. Texas Pacific Group and Silver Lake Partners acquired it in 2007. They listed on the Nasdaq in 2014. Sabre is the largest global distributions systems provider for air bookings in North America.

Sabre closed its first week of trading at $16.50 in April 2014. The odds are good we are going to see that level again soon. They recently reported earnings of 35 cents that matched estimates. Revenue rose 6.6% to $900.7 million and beat estimates for $895 million.

The company announced a new "cost reduction and business alignment program" with the goal of saving $110 million a year in expenses. They are going to reduce global headcount by 9%. They reiterated their full year guidance of $3.54-$3.62 billion and earnings of $1.31-$1.45. However, they said earnings would likely come in at the lower half of guidance. Think about that for a minute. We are going to affirm our guidance but earnings will be at the low end of that guidance. Did they actually affirm guidance of lower guidance?

They said the poor results were related to multiple factors. They halted work on the implementation of their new SabreSonic reservation system, no reason given but clearly it was not going well. They said they were seeing higher stability, security and technology costs related to a "security incident" in their Sabre Hospitality central reservation system during the quarter. Were they hacked? They did not say. Lastly, they said they were dealing with accounting changes for revenue collected from customer Alitalia, which is going through a bankruptcy process. Typically that means you get pennies on the dollar for receivables. The guidance was not good. Shares crashed from $22 to $19.50.

There was a dead cat bounce over the next couple days and now they are heading lower again. I do not see any reason why anyone would want to own Sabre when there are much better companies like Priceline, Tripadvisor, Trivago, Expedia, etc.

Expected earnings Oct 31st.

Shares closed at a two-year low on Friday at $19.73 and could be headed for a retest of the post IPO low at $15.

In addition to the short on the shares we have two ways to play the option. We can buy the October $17.50 put for 10 cents and forget about it. It will expire before earnings so it will have to be in the money at some point in the future to make any money. It is $2 OTM now and October has 75 days until expiration. If we want to roll the dice, the January $17.50 put is only 45 cents. That lets us hold over the October earnings, which should be disappointing. And gives us an extra 90 days to profit. The difference is $35 in cost. The key here is that January is well out of our normal 30-45 day play scenario. I am going to recommend the October option but you should choose the one that best suits your risk reward profile.

Update 8/7/17: Bank of America downgraded the stock from neutral to underperform (sell) and shares fell sharply at the open. It would have been nice if they had waited until after we were in the position. Shares fell about $1 at the open, rebounded slightly and then rolled over again in the afternoon. I think BAC helped us overall since it will put added pressure on the stock.

Update 8/23/17: Shares were up slightly after the company announced the refinancing of their $570 million Term A and $1.89 billion Term B credit facilities and $400 million revolving credit facility. The interest rates were lowered and the due date on the Term A facility was extended 12 months.

Position 8/7/17:

Short SABR shares @ $19.02, see portfolio graphic for stop loss.
Alternate position: Long Oct $17.50 put @ 40 cents, see portfolio graphic for stop loss.




Left Over Lottery Tickets

These positions were left over from prior plays where we had an optional option with no stop after the stock position was closed. Rather than close these for a few cents they are left open as a "Lottery Ticket" play. With months before expiration, anything is possible. A strong move in a single stock can be well worth the additional patience.

These positions are only updated on the weekend.


DDD - 3D Systems - Company Profile

Comments:

No specific news. We were stopped on the short stock position on Thursday for a minor gain. The long put position is still open.

Original Trade Description: August 7th.

3D Systems Corporation, through its subsidiaries, provides 3D printing products and services worldwide. The company's 3D printers transform data input generated by 3D design software, CAD software, or other 3D design tools into printed parts using a range of print materials, including plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and Class IV bio-compatible materials. It offers various 3D printing technologies, such as stereolithography, selective laser sintering, direct metal printing, multijet printing, and colorjet printing. The company also develops, blends, and markets various print materials, such as plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and Class IV bio-compatible materials. It offers its printers under the Accura, DuraForm, LaserForm, CastForm, and VisiJet brand names. In addition, the company provides digital design tools, including software, scanners, and haptic devices, as well as products for product design, mold and die design, 3D scan-to-print, reverse engineering, and production machining and inspection. Further, it offers proprietary software and drivers that provide part preparation, part placement, support placement, build platform management, and print queue management; and 3D virtual reality simulators and simulator modules for medical applications, as well as digitizing scanners for medical and mechanical applications. Additionally, the company provides warranty, maintenance, and training services; on-demand solutions; and software and healthcare services. Company description from FinViz.com.

3D reported adjusted earnings of 8 cents compared to 12 cents in the year ago quarter. Revenue rose less than 1% to $158.4 million but sales of 3D printers declined -4%. Analysts were expecting 12 cents and $162.5 million.

The company guided for the full year for revenue of $643-$671 million, down from $643-$684 million. They guided for earnings of 46 cents, down from 51-55 cents.

3D keeps talking about new products adding to revenue in 2018 but that is a long way off and could be wishful thinking.

Expected earnings November 1st.

Shares fell $5 on the earnings and guidance miss but I expect them to fall further. If shares break support at $12, they could fall to $6 and a 7-year low.

Position 8/8/17:

Long Sept $12 put @ 44 cents, see portfolio graphic for stop loss.

Previously closed 8/31: Short DDD shares @ $13.00, exit $12.95, +.05 gain.



ECA - Encana Corporation - Company Profile

Comments:

No specific news. Shares continue to be volatile with oil trading between $46-$48.50.

Original Trade Description: March 13th

Encana Corporation, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The company owns interests in various assets, such as the Montney in northern British Columbia and northwest Alberta; Duvernay in west central Alberta; and other upstream operations, including Wheatland in southern Alberta, Horn River in northeast British Columbia, and Deep Panuke located offshore Nova Scotia. It also holds interests in assets that comprise the Eagle Ford in south Texas; Permian in west Texas; San Juan in northwest New Mexico; Piceance in northwest Colorado; and Tuscaloosa Marine Shale in east Louisiana and west Mississippi. Company description from FinViz.com.

Encana reported earnings of 9 cents compared to estimates for 3 cents. Revenue of $822 million also beat estimates for $771.9 million. Production averages 237,100 Boepd. Drilling and completion costs declined by 30%. They reduced long term debt by $1.1 billion and net debt by 50%. They replaced 326% of production.

They currently have more than 10,000 premium drilling locations and expect to grow that number in 2017. Since December 31st, they have added more than 50 premium locations in the Eagle Ford alone. They ended 2016 with a whopping $5.3 billion in liquidity and cash of nearly $1 billion. They expect to spend $1.6 to $1.8 billion on capex in 2017 and grow liquids production by 35%. Capex will be funded by cash on hand. Proved reserves were 920 million barrels and 3P reserves were 2.372 billion barrels.

With the cash, production rates, reserves and drilling inventory listed above they are definitely an acquisition candidate with only a $10 billion market cap.

JP Morgan initiated coverage with an overweight rating and $16 price target.

Earnings July 27th.

Over the last couple of weeks an investor built up 7,000 July $11 calls at $1 each and 7,000 October $11 calls at $1.50 each. That is a $1.7 million investment in call options. I am suggesting we follow them in that trade as well as buy the stock. They may know something that is not public information or they just believe that the company is too good to pass up. With the drop in crude prices ECA has fallen to a 5-month low and is resting on the 200-day average.

Update 5/5/17: Encana reported earnings of 11 cents that beat estimates for 4 cents. Revenue of $1.297 billion also beat estimates for $789 million. Production declined 18% due to low prices and depletion. This was an excellent report from a beaten down energy stock.

Update 6/10/17: Encana agreed to sell its Piceance natural gas assets to Caerus Oil for $735 million. There are 3,100 operated wells that produce 240 million cubic feet of gas and 2,178 barrels of natural gas liquids every day.

Update 7/21/17: Encana reported earnings of 18 cents that easily beat analyst estimates for 4 cents. Revenue of $1.08 billion also beat estimates for $773.2 billion. The outlook and long-term projections were also strong. Shares closed positive but were hampered by a -1.32 drop in oil that tanked the sector.

Position 3/14/17:

Long October $11 call @ $1.40, no stop loss.

Previously closed 4/19/17: Long ECA shares @ $10.43, exit $11.15, +.72 gain.



FTR - Frontier Communications - Company Profile

Comments:

Frontier Communications operations teams are continuing to repair and assess damages to Frontier's network in Agua Dulce, Aransas Pass, Arcola, Baytown, Beach City, Bishop, Bloomington, Dickinson, League City, Kemah, Mont Belvieu, Ingleside, Orange Grove, Port O’'Conner, Port Lavaca, Portland, Rosharon, Robstown, Seadrift, Stafford, Taft, and Tivoli.

Frontier serves approximately 200,000 access lines in the South Texas area. As of midday Thursday, about 100 central offices across the territory either lack commercial power or are operating on battery and generator backup. Frontier teams are slowly gaining access to severely affected areas and are working to identify and repair damages to poles, pedestals and cables.

Despite the outages, damages and extra costs, shares rose 36 cents.

Original Trade Description: August 21st.

Frontier Communications Corporation provides communications services to residential, business, and wholesale customers in the United States. It offers broadband, video, voice, and other services and products through a combination of fiber and copper based networks to residential customers. The company also provides broadband, Ethernet, traditional circuit-based, data and optical transport, and voice services, as well as Multiprotocol Label Switching and Time Division Multiplexing services to small business, medium business, and larger enterprises, as well as sells customer premise equipment. In addition, it offers 24/7 technical support; wireless broadband services in selected markets; and frontier secure suite of products, including computer security, cloud backup and sharing, identity protection, and equipment insurance. Further, the company provides satellite TV video services; voice services, including data-based VoIP, and long distance and voice messaging services; and a package of communications services. Additionally, it offers a range of access services that allow other carriers to use facilities to originate and terminate their local and long distance voice traffic. As of December 31, 2016, it served approximately 5.4 million customers and 4.3 million broadband subscribers in 29 states. The company was formerly known as Citizens Communications Company and changed its name to Frontier Communications Corporation in July 2008. Company description from FinViz.com.

Frontier is simply being squeezed out by the competition. The CEO said with their recent earnings, they were facing "severe competition" in the telecom space. Revenue declined -12% in Q2 to $2.3 billion and missed estimates for $2.4 billion. They have missed revenue targets in 3 of the last 4 quarters. They posted an operating loss of $662 million, compared to $75 million in the year ago quarter. The loss this year was accelerated by a forced write down of goodwill for $532 million. Operating costs rose by $500 million to $2.8 billion for the quarter. The per share loss for the quarter was $1.10 and slightly better than the $1.10 analysts expected. Shares spiked temporarily but then resumed their downward trend.

Charter (CHTR), Comcast (CMCSA), AT&T (T) and Windstream (WIN) are eating their lunch. Bigger is better in the telecom space and Frontier is shrinking.

Shares are down 81% over the last year from a 52-week high of $75. On Monday they closed at a historic low. My charts only go back to 1972 and today's close was the lowest on record. I think Frontier is going to single digits. There is no light at the end of this competitive tunnel. Their only hope will be a takeout at some point. Free cash flow is shrinking from $250 to $205 million for the quarter. Liquidity is falling from $522 million to $387 million. They have a market cap of $995 million and debt of $17.8 billion. That is not a desirable picture of a takeout candidate. The more likely path is a continue slide into single digits.

Expected earnings Oct 31st.

Position 8/22/17:

Long Oct $11 put @ 90 cents, see portfolio graphic for stop loss.

Previously closed 8/29: Short FTR shares @ $12.72, exit $13.75, -1.03 loss.



INFY - Infosys - Company Profile

Comments:

Lots if infighting between the founders and board but they named an ex-CEO as the Chairman to turn the company around and find a new CEO. A founder returned to be Chairman and the rebound failed.

Original Trade Description: June 26th.

Infosys Limited, together with its subsidiaries, provides consulting, technology, and outsourcing services in North America, Europe, India, and internationally. It provides business information technology services, including application development and maintenance, independent validation, infrastructure management, and business process management services, as well as engineering services, such as engineering and life cycle solutions; and consulting and systems integration services comprising consulting, enterprise solutions, systems integration, and advanced technologies. The company's products include Finacle, a banking solution that provides analytics, core banking, consumer e-banking, corporate e-banking, Islamic banking, mobile banking, origination, payments, SME enable, treasury, wealth management, and youth banking solutions. Its products also comprise Infosys Mana, a knowledge-based AI platform; Infosys Information Platform, an analytics platform that enables to get insights from various data sources for decisions across industries; AssistEdge, CreditFinanceEdge, ProcureEdge, and TradeEdge that are cloud-hosted business platforms; Panaya that enables various SAP and Oracle EBS changes; and Skava, which are digital experience solutions, as well as analytics, cloud, and digital transformation services. The company serves clients in the financial services, manufacturing, retail, consumer packaged goods and logistics, energy and utilities, communication and services, hi-tech, life sciences, healthcare and insurance, and other industries. Company description from FinViz.com.

Infosys reported earnings of 24 cents that rose 5.8% and beat estimates by a penny. Revenues of $2.651 billion beat estimates for $2.629 billion. Revenues rose 6.3% on a constant currency basis. The company announced numerous wins of high profile contracts.

The company is dilligently following its "Renew Now" program with three offerings. Those are Artificial Intelligence, Knowledge-based IT and Design Thinking. During the reported quarter, Infosys continued to renew traditional services and rolled out others in areas such as Cloud Ecosystem, Big Data and Analytics, API and Micro Services, Cyber Security, and IoT Engineering Services. Also, during the quarter, Infosys launched Boundaryless Data Lake, an offering powered by the Information Grid Solution on Amazon Web Services (AWS).

The company raised 2018 guidance with revenue growth in the range of 7.1% to 9.1%, up from 6.1%-8.1%.

Earnings October 13th.

Shares rebounded over the last week to close at a new 9-month high on Wednesday.

Update 8/18/17: Shares spiked to a new 9-month high on Thursday then collapsed -7% on Friday. The drop came after the CEO quit because of a fight with the founders. CEO Vishal Sikka, resigned as CEO but will remain as executive vice chairman. Interim CEO Pravin Rao will report to Sikka until a new CEO can be found. Sikka had been praised for the transformational changes he was trying to put in place but the founders continually put roadblocks in his path. This was probably the kiss of death for this position but for 25 cents, we will let it ride.

Position 7/27/17:

Long Oct $17 call @ 25 cents. See portfolio graphic for stop loss.

Previously closed 8/7: Long INFY shares @ $15.66, exit $15.55, -.11 loss.





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