Is the market setting up for a summer surge or a summer slumber?

The Nasdaq and S&P are making new highs on low volume moves. The Dow is trying to make a new high but is stuck about 35 points below its prior high at 21,115. The Russell 2000 is well below resistance and just barely managing to avoid a sell off. The mixture of index performance along with the weak small caps suggests the market is going to have a tough time moving higher in the summer months. However, everyone who has written off the market as overbought and overextended over the last several months has been wrong.

The markets have shaken off numerous problems that would have tanked a normal market. Every dip has been bought although the volume is slowing. We really cannot use last week as any indication of market strength or weakness. It was a holiday week and weekend event risk probably had a lot to do with the lackluster performance on Friday.

The challenge over the next several weeks will be the lack of a catalyst to move us higher. There is nothing on the calendar that could provide an upside surge since the Q1 earnings cycle is over. The Fed meets on the 14th and is widely expected to hike interest rates and could potentially announce the first move in reducing their $4.5 trillion balance sheet. Summer rate hikes rarely result in summer rallies. This is due to the lower volume and the general lack of interest. Investors are more interested in planning vacations and spending weekends at the beach or in the mountains. Investing interest tends to fade.


The Q1 earnings at 15.6% growth is a main reason we are still levitating. The next three quarters are also expected to post double-digit earnings growth and this will be the best year since 2011. That is a potent formula for long-term investors.

The only major earnings this week are Hewlett Packard, Broadcom, VMWare, Palo Alto Networks and Dollar General.


The risk remains the political headlines. Never in my life have I seen such a fractured Congress and outright hostility in the press. The president is egging them on by picking a battle with the press at every opportunity. The problem with this strategy is that any landmines that Trump encounters along the way will be blown well out of proportion because of the battle with the press. As we saw on May 17th, headlines do matter.

The Dow gapped over prior resistance at 21,000 on Thursday and barely held the gains on Friday with a -30 point drop at the open. The index is 35 points below its prior high. If the Dow could surge over 21,115 by 50-60 points and hold it that would be very bullish for market sentiment. If the index falls back to support at 20,900 that would be bearish. We are at a critical point in market direction where the Dow could easily fail.


The S&P has closed positive for seven consecutive days. The last two days have been new highs. The next material resistance is 2,445, which is long term from early 2015. The S&P needs to rest. The 7-day sprint has put it in a short-term overbought condition. The ideal direction would be to drop back to 2,400 as support and then rally to a new high. That would energize investors.


The Nasdaq continues to lead the market but the gains are starting to slow. The big run since mid April has already attracted most investors and we are running out of fresh money. However, note how quickly the market dip was bought. There is no shortage of cash on the sidelines if a buying opportunity arises. The Nasdaq is above long term resistance and there is nothing to slow it down other than a loss of traction.


The Russell 2000 is suffering from pre-balance syndrome. The index will be rebalanced at the end of June and the hedge funds have already figured out which stocks they believe will be removed from the index. Those stocks are being sold in advance and that weighs on the index. The first actual list will be released by Russell on June 9th and that is when the average investor can join the party and short those stocks.


The trend is our friend until it ends. Paul Singer, CEO of Elliott Management, warned last week that nobody knows when this "levitating magic act" will end but when it does it will be ugly. I am thankful we have gurus like Singer and others constantly warning of the market's demise. That is what makes a market. With every warning, there comes a new wave of investors shorting stocks. With every market uptick, they are forced to cover those shorts and the cycle repeats. It is when everyone is telling us the market can rise 50% more that we should worry.

Enter passively, exit aggressively.

Jim Brown

Send Jim an email



NEW DIRECTIONAL CALL PLAY

GDDY - GoDaddy - Company Profile

GoDaddy Inc. designs and develops cloud-based technology products for small businesses, Web design professionals, and individuals in the United States and internationally. It provides domain name registration product that enables to engage customers at the initial stage of establishing a digital identity; hosting and presence products, such as shared Website hosting, Website hosting on virtual dedicated servers and dedicated servers, managed hosting, and security. The company also offers Website builder, an online tool that enables customers to build Websites; online store product that allows customers to create their own standalone Website with an integrated online store optimized for mobile shopping; and search engine visibility product that helps customers get their Websites found on search sites through search engine optimization. In addition, the company offers business application products, including Microsoft Office 365, email accounts, email marketing, and telephony services. Company description from FinViz.com

GoDaddy reported earnings of a penny that beat estimates for a loss of 4 cents. Revenue of $489.7 million beat estimates for $487.8 million. They guided for the current quarter for revenue in the range of $548-$553 million. Full year guidance was $2.19-$2.23 billion. The three-year-old company is growing and turning profitable.

Earnings August 1st.

On May 8th, they announced a secondary of 24 million shares held by original investors with an offering price of $38.50. The company also said it was buying back $275 million of its own limited liability units from those initial shareholders along with an equal number of class B shares at the offering price.

Shares were trading at a high of $40.39 the day before the market crash on May 17th. The drop knocked them back to $38.34. The rebound was immediate and shares closed at $42 on Friday.

There is a persistent rumor that GoDaddy is looking for an acquisition partner. It would seem to me if that was the case, those initial shareholders including KKR and Silver Lake Partners would not have sold their shares. However, it has been a rocky road since the company went public at $25 in 2015. It is possible their continued involvement was hindering the search for an acquirer. Many bidders would have questioned why GoDaddy was looking for a SugarDaddy with those deep pockets already invested.

Those investors are now gone and the market sucked up those 24 million shares without even blinking. The stock is rising sharply in a bullish market for tech stocks. This may be their time in the spotlight.

Options are cheap so I am willing to take a chance on continued good fortune.

Buy August $44 call, currently $1.60, initial stop loss $39.75.



DIS - Walt Disney Co - Company Profile

The Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. The company's Media Networks segment operates cable programming services, including the ESPN, Disney channels, and Freeform networks; broadcast businesses, which include the ABC TV Network and eight owned television stations; radio businesses consisting of the ESPN Radio Network; and the Radio Disney network. It also produces and sells original live-action and animated television programming to first-run syndication and other television markets, as well as subscription video on demand services and in home entertainment formats, such as DVD, Blu-Ray, and iTunes. Its Parks and Resorts segment owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. This segment also operates Disney Resort & Spa in Hawaii, Disney Vacation Club, Disney Cruise Line, and Adventures by Disney; and manages Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort, as well as licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. The company's Studio Entertainment segment produces and acquires live-action and animated motion pictures for distribution in the theatrical, home entertainment, and television markets primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and Touchstone banners. This segment also produces stage plays and musical recordings; licenses and produces live entertainment events; and provides visual and audio effects, and other post-production services. Its Consumer Products & Interactive Media segment licenses its trade names, characters, and visual and literary properties; develops and publishes games for mobile platforms; and sells its products through The Disney Store, DisneyStore.com, and MarvelStore.com, as well as directly to retailers. Company description from FinViz.com

There have been hundreds of headlines about Disney and their future since the earnings in early May. The stock fell from the $116 high to $105 on May 17th when the market sold off. That appears to have been the end of the Disney decline. Shares are now honoring support at $107 and starting to move higher.

The fifth edition of Pirates of the Caribbean opened poorly this weekend but is still on track for $77 million for the holiday weekend and should gross $600 to $800 million globally.

Disney is opening the World of Avatar at Walt Disney World after a $500 million investment. They are also opening Toy Story Land and they have two new cruise ships under construction. Credit Suisse believes Disney's theme park revenue could triple to $2.7 billion. That would put to rest fears over cord cutting at ESPN. The analysts believes the theme park revenue growth is mostly overlooked by investors.

Earnings are August 8th.

I believe the worst is over for Disney and they will likely retest their recent highs. This is a cash generating monster and while the stock moves slowly, it is also relatively low volatility except for the period right after earnings.

Buy Aug $110 call, currently $2.32, initial stop loss $103.75.


If there is a trade you would like me to consider or you have comments on this newsletter please click the email link below.

Jim Brown

Send Jim an email



Current Portfolio


Open Positions

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline. Any items shaded in blue were previously closed.




Current Position Changes


CGNX - Cognex
The long call position was entered at the open on Tuesday.


Original Play Recommendations (Alpha by Symbol)


ATVI - Activision Blizzard - Company Profile

Comments:

No specific news. ATVI shares are not slowing. They made a new closing high on Thursday.

Original Trade Description: May 15th.

Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Company description from FinViz.com

Activision reported Q1 earnings of 56 cents, up 17%. Sales rose 19% to $1.73 billion. Activision had originally guided for 25 cents and $1.55 billion. Analysts were expecting 22 cents and $1.1 billion so it was a major blowout. For the full year they raised guidance to 88 cents and $6.1 billion, up from 72 cents and $6.0 billion.

Blizzards's monthly active users rose to 431 million. King Digital has 342 million active users. The new Overwatch game was the fastest Blizzard title to hit 25 million registered players and now has more than 30 million. Revenues from in game purchases rose 25% driven by World of Warcraft and Overwatch customization features.

Earnings August 3rd.

We just exited a profitable position on ATVI last week in order to avoid any potential earnings disappointment. Hindsight is 20:20 as shares continued to move higher. With the strong earnings and raised guidance, Activision should continue higher. Options are ridiculously cheap.

Position 5/16/17:

Long August $60 call @ $1.69, see portfolio graphic for stop loss.



CGNX - Cognex - Company Profile

Comments:

No specific news. Shares spiked at the open on Tuesday and we got a really bad fill. The option was quoted around $4.50 at the close on Monday and it spiked to $6.20 at the open on Tuesday. Fortunately the short strike spiked as well so the net debit was the sale but it is going to take a little longer to get us positive on the long call. Hopefully anyone entering this position noticed the gap and waited the 10 minutes for the premiums to return to normal.

Original Trade Description: May 22nd.

Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes worldwide. The company offers machine vision products, which are used to automate the manufacturing and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. Its products include VisionPro, a software suite that provides various vision tools for programming; displacement sensors with vision software for use in 3D application; In-Sight vision systems that perform various vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance; In-Sight vision sensors; ID products, which are used for reading codes that are applied on discrete items during the manufacturing process, as well as have applications in logistics automation for package sorting and distribution; DataMan barcode readers; barcode verifiers; vision-enabled mobile terminals for industrial barcode reading applications; and barcode scanning software development kits. The company sells its products through direct sales force, as well as through a network of distributors and integrators. Company description from FinViz.com

Cognex reported earnings of 42 cents that rose 200% and beat estimates for 28 cents. Revenue of $134.9 million rose 40% and beat estimates for $123.8 million. They guided for revenue of $165-$170 million for the current quarter and analysts were expecting $173.9 million. Shares did not decline because of the record earnings and their normally conservative guidance. Operating margins rose from 17% to 28%.

The company said the machine automation for the manufacturing sector was growing very strongly and accelerating. Revenue from that segment rose in the "mid-teens" percentages and their automotive business grew 20%.

In the San Francisco gold rush the people that made the most money were the ones that sold picks, shovels and wheelbarrows. Cognex is in the business of selling business tools that help businesses run better, cheaper and faster.

Earnings July 31st.

Shares dilled $5 in the market crash and have already rebounded to close at a new high on Monday. This should continue assuming the market cooperates.

Because of the stock price in relation to the strike price this needs to be a spread to produce the best results.

Position 4/23/17:

Long Aug $95 call @ $6.17, see portfolio graphic for stop loss.
Sell short Aug $105 call @ $2.67, see portfolio graphic for stop loss.
Net debit $3.50.



COMM - Commscope Holdings - Company Profile

Comments:

No specific news. Shares moved sideways and the opening drop on Wednesday was immediately bought.

Original Trade Description: May 8th.

CommScope Holding Company, Inc. provides infrastructure solutions for communications networks worldwide. The company's CommScope Connectivity Solutions segment offers optical fiber and twisted pair structured cable solutions, intelligent infrastructure software, and network rack and cabinet enclosures under the SYSTIMAX, AMP NETCONNECT, and Uniprise brands; and fiber management systems, patch cords and panels, complete cabling systems, and cable assemblies for use in offices and data centers. This segment also provides fiber optic connectivity solutions, including hardened connector systems, fiber distribution hubs and management systems, couplers and splitters, plug and play multiport service terminals, hardened optical terminating enclosures, high density cable assemblies, splices, and splice closures that supports video, voice, and high-speed data services provided by telecommunications operators and multi-system operators. Its CommScope Mobility Solutions segment offers macro cell site solutions for wireless tower sites and on rooftops, such as base station antennas, microwave antennas, hybrid fiber-feeder and power cables, coaxial cables, connectors, and filters; metro cell solutions for outdoors on street poles and on other urban structures comprising radio frequency delivery and connectivity solutions, equipment housing, and concealment; and small cell and distributed antenna system (DAS) solutions consisting of DAS and distributed cell solutions that allow wireless operators to enhance efficiency, and cellular coverage and capacity in network conditions. This segment provides its solutions under the Andrew brand. CommScope Holding Company, Inc. sells its products through a network of distributors, system integrators, and resellers. The company was formerly known as Cedar I Holding Company, Inc. Company description from FinViz.com

Commscope reported earnings of 52 cents compared to estimates for 53 cents. Revenue of $1.14 billion matched street estimates. They guided for the current quarter for earnings of 62-67 cents and revenue from $1.20 to $1.25 billion. Full year earnings are expected to be $2.70-$2.80 with revenue $4.85-$4.95 billion.

The earnings were ok, the guidance was a killer. Analysts were expecting $2.95 and $5.1 billion. Shares fell from $41 to $33. Management blamed the miss on "more cautious spending patterns" at North American telecom customers. They are also experiencing some merger pains from their 2015 acquisition of TE Connectivity, which they said they were addressing aggressively. The TE products were lower margin products.

Despite the negativity, telecom spending is expected to pickup in the second half of the year.

Earnings August 3rd.

Shares are already rebounding and I believe this is a buying opportunity on a previously strong chart. If I am wrong the option is cheap and we do not have much at risk.

Position 5/9/17:

Long August $38 calls @ $1.25, see portfolio graphic for stop loss.



FMC - FMC Corp - Company Profile

Comments:

No specific news. Michael Price, the 271st richest person in the world, opened a new position with 250,000 shares.

Original Trade Description: April 17th.

FMC Corporation, a diversified chemical company, provides solutions, applications, and products for the agricultural, consumer, and industrial markets worldwide. The company operates through three segments: FMC Agricultural Solutions, FMC Health and Nutrition, and FMC Lithium. The FMC Agricultural Solutions segment develops, manufactures, and sells crop protection chemicals, such as insecticides, herbicides, and fungicides that are used in agriculture to enhance crop yield and by controlling a range of insects, weeds, and diseases, as well as in non-agricultural markets for pest control. The FMC Health and Nutrition segment offers microcrystalline cellulose for use in drug dry tablet binders and disintegrants, and food ingredients; carrageenan for use in food ingredients for thickening and stabilizing, pharmaceutical, and nutraceutical encapsulates; alginates for food ingredients, pharmaceutical excipients, healthcare, and industrial uses; natural colorants for use in foods, pharmaceutical, and cosmetics; and omega-3 EPA/DHA for nutraceutical and pharmaceutical uses. The FMC Lithium segment offers lithium for use in batteries, polymers, pharmaceuticals, greases and lubricants, glass and ceramics, and other industrial uses. FMC Corporation was founded in 1884 and is headquartered in Philadelphia, Pennsylvania. Company description from FinViz.com

FMC has been around forever as in 123 years. However, last month it entered a new phase of its life. DuPont is (DD) merging with Dow Chemical (DOW) and the EU is forcing them to divest DuPont's crop protection business in order to gain approval of the merger.

On March 31st, the companies announced that FMC will acquire DuPont's crop protection business and overnight become the fifth largest in the world. Secondly, FMC will sell its health and nutrition business to DuPont. This is a low margin, low growth business that FMC is glad to be selling. FMC will pay DuPont $1.2 billion in cash.

The transactions will be immediately accretive to FMC upon closing. FMC expects revenue from the acquired business of $1.5 billion in 2017 and $475 million in EBITDA. Total annual revenue will be $3.8 billion. The combination of the DuPont crop business with the R&D capabilities of FMC it will catapult FMC into an entirely new range of capabilities. The company will acquire multiple major brands of pesticide and herbicides. It will also expand the reach of FMC around the world where there was little market penetration in the past. FMC is gaining a global manufacturing network of four active ingredient manufacturing facilities and 10 regional formulation plants.

In one transaction FMC dumped its underperforming health business and gained a crop protection business equal or greater than its own and cleaned up their balance sheet at the same time.

Earnings are May 2nd. There is no way to play this without holding over that earnings report. With all the good news breaking out about the transaction, the earnings will be another podium to brag about their good fortune.

Update 5/8/17: FMC reported earnings of 43 cents that missed estimates for 56 cents. Revenue of $596 million missed estimates for $742 million. However, those included some discontinued operations that reduced earnings by 21 cents and revenue by $177 million. When adding those back in they beat on both numbers. Shares dipped on the initial report but rebounded once the details were known. The acquisition of the Dow assets is expected to close in Q4.

Position 4/18/17:

Long July $77.50 call @ $2.54, see portfolio graphic for stop loss.



HAIN - Hain Celestial - Company Profile

Comments:

Hain said the prior week they would release earnings sometime this month. They are rapidly running out of month. The Nasdaq has given them until June 15th or be delisted.

Original Trade Description: March 20th

The Hain Celestial Group, Inc. manufactures, markets, distributes, and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula; infant, toddler, and kids foods; diapers and wipes; rice and grain-based products; flour and baking mixes; breads, hot and cold cereals, pasta, condiments, cooking and culinary oils, granolas, granola bars, and cereal bars; canned, chilled fresh, aseptic, and instant soups; Greek-style yogurt; chilies and packaged grains; and chocolates and nut butters, as well as plant-based beverages and frozen desserts, such as soy, rice, almond, and coconut. The company's grocery products also comprise juices, hot-eating, chilled and frozen desserts, cookies, crackers, gluten-free frozen entrees and bars, frozen pastas and ethnic meals, frozen fruits and vegetables, cut fresh fruits, refrigerated and frozen soy protein meat-alternative products, tofu, seitan and tempeh products, jams, fruit spreads and jelly, honey, marmalade, and other food products. In addition, it provides snack products, such as potato, root vegetable, and other vegetable chips, as well as straws, tortilla chips, whole grain chips, pita chips, puffs, and popcorn; specialty teas, including herbal, green, black, wellness, rooibos, and chai tea lattes; ready-to-drink beverages comprising organic kombucha and chai tea lattes; personal care products consisting of skin, hair and oral care, deodorants, baby care items, acne treatment, body washes, and sunscreens; and poultry and protein products, such as turkey and chicken products. The company sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, and drug and convenience stores in approximately 70 countries worldwide. Company description from FinViz.com

We played Hain before back in the fall. Basically, they have not filed their quarterly reports since last May because of a review of accounting procedures. They have suffered over the last year and have reportedly spent $20 million in the complete accounting review for years past and a review of their procedures. They are facing class action suits and SEC probes but none of these things will have a lasting impact.

They are facing a new deadline of May for their reports or they will be in default with their lenders. While they will not say when they will file the back reports, they continue to assure investors there was no wrongdoing and these types of corporate autopsies for prior years take time.

They are so undervalued compared to their peers and their historical norms, it is silly not to have a long position. Once they file the reports this will all be behind them.

I am recommending we buy the August $40 call and forget about it. At $2 it is not a lot of money and they could quickly return to the $50s once they file the reports.

Position 3/21/17:

Long Aug $40 call @ $1.97, see portfolio graphic for stop loss.



LIT - Lithium ETF - Company Profile

Comments:

No specific news. New intraday high. I looked again at the options and the Jan $30 call was $5.00 ask and 10 cents bid. That market maker should be expelled.

Original Trade Description: April 17th.

The investment seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index. The fund invests at least 80% of its total assets in the securities of the underlying index and in American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the underlying index. The underlying index is designed to measure broad-based equity market performance of global companies involved in the lithium industry. The fund is non-diversified. Company description from FinViz.com

Lithium-Ion batteries are becoming the fuel of the future. We are right on the edge of an explosion in demand for lithium. Tesla is only making 100,000 cars per year today but by the end of 2018 they expect to be making up to 500,000 cars. They are only one of the manufacturers making electric vehicles. Others are right on the verge of their own surge in manufacturing.

Tesla also makes the batteries for the Solar City energy storage units and the Tesla storage batteries for residential, commercial and industrial use. This barely even scratched the surface of lithium demand two years ago. Add to that nearly 2 billion cell phones and tablets and suddenly there is a surge in lithium demand that is not going to stop.

Tesla's Gigafactory is so big that it will double the entire planet's battery making capacity. Elon Musk is now saying he may need up to four additional Gigafactories to keep up with demand as he builds hundreds of thousands of electric cars per year plus the solar storage demand for mass scale utility companies, businesses, residential, etc.

The demand for lithium could rise by 1,000% over the next several years. Companies are racing to find new supplies of the raw material and contract it before the prices explode out of sight.

Rather than buying one company that maybe has one mine or one division to produce lithium there is now an ETF for that purpose. It has options but the prices are crazy if you can even find them listed. Most quote locations just list zero for the bid/ask.

The ETF is relatively inexpensive dollar wise given the coming surge in lithium demand and prices. This may be as close as we can get to the ground floor since the odds of it moving lower are almost zero.

This will be a long-term hold.

Position 4/18/17:

Long LIT shares @ $28.20. See portfolio graphic for stop loss.



SMH - Semiconductor Index - ETF Profile

Comments:

Still making new highs thanks to Nvidia and others. Chips lead the Nasdaq.

Original Trade Description: May 8th.

VanEck Vectors Semiconductor ETF (SMH) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS US Listed Semiconductor 25 Index (MVSMHTR), which is intended to track the overall performance of companies involved in semiconductor production and equipment.

The top five components are TSM 12.9%, INTC 11.4%, QCOM 5.7%, AMAT 5.34% and NVDA 5%. The rest of the components are the top names in the business.

The ETF has had a good year with a $30 gain since last June. However, electronics are the fastest selling consumer items and sales are increasing every month. The chip sector is the leading edge of the tech sector. With the iPhone 8 coming along with the 5G revolution beginning, the chip stocks are going to continue rising.

Nvidia reports earnings on Tuesday after the close and that could lift the SMH.

The ETF paused on April 28th and has been moving slowly sideways with a minor upward bias. This corresponds with flat markets over the last two weeks. If the markets are going to break through current resistance levels the SMH should power higher as well. The semiconductor index always leads the Nasdaq but up and down.

Position 5/9/17:

Long Aug $82 call @ $2.40, see portfolio graphic for stop loss.



SWKS - Skyworks Solutions - Company Profile

Comments:

No specific news. Shares still moving higher. Skyworks will present at two investor conferences on June 6th and 7th.

Original Trade Description: May 1st.

Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Skyworks Solutions, Inc. sells its products through direct sales force, electronic component distributors, and independent sales representatives. Company description from FinViz.com

Skyworks reported earnings of $1.45 that beat estimates for $1.40. Revenue of $851.7 million beat estimates for $840.3 million. They guided for Q2 revenue of $890 million and earnings of $1.52. Analysts were expecting $866.6 million and $1.49. Annual revenue growth os forecast at 18%.

On the conference call the company said Apple was still 40% of the company's revenue but Samsung and Huawei now exceeded 10% each. The company said the quarter just ended was normally their low point for the year and it was actually a strong quarter this year. They expect even better quarters later this year when the next generation of phones begin to ship in quantity. The Apple iPhone 7s and/or 8 will be a big boost to revenue. They are looking at double digit revenue increases for the next two quarters.

Earnings July 27th.

Shares inexplicably declined $5 after the report. Multiple analysts immediately came out claiming this was a buying opportunity. I agree.

We have to reach out to the August option cycle to get past the July earnings and keep that earnings expectation premium inflated.

Position 5/2/17:

Long Aug $105 call @ $4.15, see portfolio graphic for stop loss.



Prices Quoted in Newsletter

At Option Investor, we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.

The prices quoted in the newsletter are the end of day prices in most cases.

When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.

For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time readers are able to get a better fill than the opening print because of market maker bias at the open.

For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.

All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.