If you thought Monday's trading was dull, just stick around a couple days.
This week may not have a holiday in it but it is still a holiday week. The July 4th holiday is the biggest detriment to work of any holiday in the spring/summer months. The holiday is on Tuesday this year, which means Monday should have been a market holiday as well. Since this is a summer holiday, there will be a large number of workers taking off extra days this week to stretch out their weekend. Thursday and Friday will be a market ghost town and Monday will be lucky to trade 3 billion shares or less than half of normal.
The next two days are end of quarter window dressing days. Monday was supposed to be a dressing day and it started off well before a sell program hit the technology sector and caused a 70 point drop in the Nasdaq from the opening highs. That drop was a wakeup call for traders already day dreaming about what they were going to do next weekend. The chip sector was the leader in the decline. The dip was bought and the Dow, S&P and Russell returned to positive territory and the Nasdaq recovered to lose only 18 points at the close.
Unless we have another surprise on Tuesday, we "should" see the prior Dow winners and big cap tech winners resume their climb as portfolio managers dress up their portfolios for the month end, quarter end and first half statements.
The Nasdaq rallied to resistance at 6,300 at the open then fell back to use prior resistance at 6,245 as support. While it produced an ugly red candle, it did no real harm to the trend. The Nasdaq still appears to be heading higher.
The dow was powered by gains in prior underperformers. Goldman, Disney and IBM have not been investor favorites in recent sessions. Boeing has been a favorite and it was the biggest lower. This appears to be some rotation going into the end of the quarter.
The Dow rallied to 21,500 and dropped back to 21,381 and a return to support for the fourth consecutive day. The Dow trend was not damaged today but sentiment was probably bruised. When the market is supposed to go up as it is this week and experiences a sudden reversal, it makes traders question their market outlook.
As long as that support around 21,385 holds there is no damage. If we were to dip much below 21,350 it could produce a lot of exits. Traders are probably content to hold long positions going into the holiday as long as the market is rising. If it starts to weaken, they are likely to bail out of those positions and close up shop for the week.
The S&P chart is similar to the Dow. The short term support was tested again and the index closed only fractionally positive after being up 11 points intraday. Resistance remains 2,440, 2,450 with support at 2,420. The 2,450 resistance is very important because that is the year-end price target for a lot of analysts. That becomes a sell signal when it is hit in light volume.
The Russell 2000 rose as expected as fund managers continued adding to and adjusting their portfolios as a result of Friday's rebalance process. The Russell "should" have a positive bias the rest of the week.
There are no market moving reports on the economic calendar. Unless there is a significant deviation from the expectations, they will probably be ignored. This is not the calendar traders are looking at this week. They are looking at the holiday calendar instead.
The market "should" have a positive bias the next two days. On Thursday and Friday, there could be some weekend event risk selling since Monday is almost a holiday, traders will be away from their computers for a minimum of four days. That is a long time in the markets with geopolitical events not taking the weekend off.
I would not be a aggressive buyer of anything until after the 4th. There is no reason to add risk ahead of events that could turn into a disaster. The 4th of July is always filled with serious terror risk because of all the public events in a nighttime setting without a lot of security. I am always amazed that we have not had any attacks in the past. As Maverick said in Top Gun, "This is what I call a target rich environment."
Enter passively, exit aggressively.
Send Jim an email
NEW DIRECTIONAL CALL PLAY
COST - Costco - Company Profile
Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company provides dry and packaged foods, and groceries; snack foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances, electronics, health and beauty aids, hardware, and garden and patio; meat, bakery, deli, and produces; and apparel and small appliances. It also operates gas stations, pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and engages in the travel businesses. In addition, the company provides gold star individual and business membership services. As of August 28, 2016, it operated 715 warehouses, including 501 warehouses in the United States, Washington, District of Columbia, and Puerto Rico; 91 in Canada; 36 in Mexico; 28 in the United Kingdom; 25 in Japan; 12 in Korea; 12 in Taiwan; 8 in Australia; and 2 in Spain. Further, the company sells its products through online. Company description from FinViz.com
Estimated earnings date August 24th.
Costco shares were crushed from $180 to $156 on the Amazon acquisition bid for Whole Foods. While this could have "some" impact on the grocery sector "if" the acquisition is actually completed, it would be at least 12-18 months before any changes would be made at Whole Foods. Amazon hopes to complete the acquisition in Q4 but multiple analysts and commentators claim the regulatory approvals are going to be a nightmare even through Whole Foods only has 4% market share of groceries in the U.S. They believe if it does close it will be Q1 or even Q2. Assuming the most likely being Q1, there would probably not be any major changes until Q1-2019.
Whole Foods has 460 stores and revenue of $15.8 billion. Costco has 750 and does $123.3 billion in annual revenue. Whatever Amazon does to Whole Foods will have such a minor impact on Costco over the next two years that it will be insignificant. I am recommending we buy this dip because sooner or later investors will come to their senses.
A Raymond James analyst upgraded Costco to outperform on Monday saying, "enough already!" "The Whole Foods acquisition will not materially impact Costco's unique business model and we would be buyers on this weakness."
I considered waiting until Costco rebounded a little more but that will just make our option premiums more expensive. We know Costco is not going out of business and there will be no impact for a long time, if ever. I am recommending we bite the bullet and just buy it at this level.
Buy Oct $168 call, currently $4.05. Initial stop loss $154.50.
The $168 strike is left over from the $7 special dividend in May. It was originally a $175 strike but was reduced by the dividend amount.
If there is a trade you would like me to consider or you have comments on this newsletter please click the email link below.
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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
THO - Thor Industries
The long call position was entered at the open on Tuesday.
FMC - FMC Corp
The long call position was closed at the open on Tuesday.
Original Play Recommendations (Alpha by Symbol)
ATVI - Activision Blizzard - Company Profile
No specific news. Shares closed at a new high on Thursday and faded today with the Nasdaq.
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.
Long August $60 call @ $2.24, see portfolio graphic for stop loss.
Previously closed 6/12/17: Long August $60 call @ $1.69, exit $2.15, +.46 gain.
CGNX - Cognex - Company Profile
No specific news. Shares still holding over short-term support.
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.
Long Aug $95 call @ $4.02, see portfolio graphic for stop loss.
Closed 6/12/17: Long Aug $95 call @ $6.17, exit $3.30, -2.87 loss.
Closed 6/12/17: Short Aug $105 call @ $2.67, exit $1.10, +1.57 gain.
Net loss 1.30.
COMM - Commscope Holdings - Company Profile
No specific news.
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.
Long August $38 calls @ $1.25, see portfolio graphic for stop loss.
FB - Facebook - Company Profile
No specific news. Facebook has been the best performing FAANG stock in the Nasdaq rebound. Shares hit a new high this morning but faded when the Nasdaq rolled over.
Original Trade Description: June 12th.
Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Its solutions include Facebook Website and mobile application that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers; Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application to communicate with people and businesses across platforms and devices; and WhatsApp Messenger, a mobile messaging application. The company also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. Company description from FinViz.com.
Facebook also blew away earnings estimates and they are growing earnings at the fastest rate of any of the FAANG stocks. They have multiple revenue streams and sites like Instagram and WhatsApp that are just starting to accelerate earnings. They said Instagram had reached 50,000 advertisers. Facebook's problem is they do not have enough page views to monetize despite the 1.9 billion users. They have more advertisers than they have space.
Earnings August 2nd.
Facebook was setting new highs last week until Friday's flash crash. The two day decline knocked the stock back from $155.50 to $144.50, and exactly to support from the May 17th bottom. This "should" be the perfect spot to open a new position on FB. The two day decline has deflated the option premiums and once the tech sector begins to rebound, the FAANG stocks should be leaders again because of their earnings growth rates.
Long Aug $155 call @ $4.45, see portfolio graphic for stop loss.
FMC - FMC Corp - Company Profile
No specific news. We closed the position at the open on Tuesday.
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.
Closed 6/20/17: Long July $77.50 call @ $2.54, exit .90, -1.64 loss.
GDDY - GoDaddy - Company Profile
GoDaddy unveiled a new website security product aimed at business websites. Shares were recovering nicely until the Nasdaq rolled over today.
Original Trade Description: May 29th.
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.
Long August $44 call @ $1.45, see portfolio graphic for stop loss.
HAIN - Hain Celestial - Company Profile
After a year of accounting research, HAIN said there was no need to restate earnings. The problems they found were so minor they were not worth the effort. They implemented some additional controls and promoted James Langrock to EVP and CFO. They discussed plans to cut costs by $350 million over the next three years and said they will buy back $250 million in stock.
They also reported earnings of 33 cents that missed estimates for 52 cents. They guided for the current quarter to earnings of 40-43 cents. For the full year they guided for $1.19-$1.22 and revenue of $2.84-$2.86 billion.
Shares were very volatile on Friday with all the headlines in the press release and the CEO's appearance on CNBC. On Monday shares rose $6.4% to $33.63. We have an August $40 call and we actually have a chance of it regaining value. I was hoping for more of a spike on the earnings release but the earnings miss overshadowed the positive news about the restatement. Since there is nothing wrong with the company or the past financials and it was crushed from $57 to $31 on the initial restatement warning, we could see funds begin to buy it again.
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.
Long Aug $40 call @ $1.97, see portfolio graphic for stop loss.
RH - RH Inc - Company Profile
No specific news. The analyst community is starting to make positive comments about the switch to a membership model. Shares continue to climb and today was a new 18-month high.
Original Trade Description: June 12th.
RH, together with its subsidiaries, operates as a retailer in the home furnishings market. The company offers products in various categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and child and teen furnishings. It provides its products through its retail galleries and Source Books, as well as online through rh.com, rhmodern.com, restorationhardware.com, rhbabyandchild.com, rhteen.com, and waterworks.com Websites. As of January 28, 2017, the company operated 85 retail galleries, including 50 legacy galleries, 6 larger format design galleries, 8 next generation design galleries, 1 RH modern gallery, and 5 RH baby and child galleries in the United States and Canada; 15 Waterworks showrooms in the United States and the United Kingdom; and 28 outlet stores. The company was formerly known as Restoration Hardware Holdings, Inc. and changed its name to RH in January 2017. Company description from FinViz.com
RH reported earnings of 5 cents that beat estimates for 4 cents. Revenue of $562.1 million beat estimates for $560.4 million. So far, so good. However, they guided for Q2 earnings of 38-43 cents and analysts were expecting 53-75 cents. No, that is not a misprint.
The company said it was ditching its prior merchandising model and switching to a membership model in order to make the company Amazon proof and enhance the customer experience. They are moving away from the highly promotional retail experience with constant sales and discounts and moving to a membership model where the focus will be on the customer experience. "Members" will pay $100 a year for the ability to shop in a high quality store where they will find only high quality merchandise.
Shares crashed 26% to $42 on the guidance but the rebound has been amazing. Apparently investors like the concept and the idea of a "Costco" model but in high quality products.
Earnings August 31st.
Long August $55 call @ $2.70, see portfolio graphic for stop loss.
SMH - Semiconductor Index - ETF Profile
The semiconductor index broke through resistance at the open but the chip sector was quickly sold. The drop in chip stocks was a primary reason for the Nasdaq decline on Monday .
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.
The semiconductor index always leads the Nasdaq both up and down.
Long Aug $88 call @ $2.33, see portfolio graphic for stop loss.
Previously closed 6/9/17: Long Aug $82 call @ $2.40, exit $5.50, +$3.10 gain.
SWKS - Skyworks Solutions - Company Profile
No specific news. Chip stocks were hit hard on Monday and SWKS lost -3%. Let's hope this was a one day event.
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.
Long Aug $105 call @ $4.15, see portfolio graphic for stop loss.
THO - Thor Industries- Company Profile
No specific news. Citigroup reiterated a buy rating with a $118 price target. The Winnebago earnings were positive last week and gave the sector another boost.
Original Trade Description: June 19th.
Thor Industries, Inc., through its subsidiaries, designs, manufactures, and sells recreational vehicles, and related parts and accessories primarily in the United States and Canada. It operates through Towable Recreational Vehicles and Motorized Recreational Vehicles segments. The company offers travel trailers under the Airstream International, Classic Limited, Sport, Flying Cloud, Land Yacht, and Eddie Bauer trade names, as well as Interstate and Autobahn Class B motorhomes; gasoline and diesel Class A and Class C motorhomes under the Four Winds, Hurricane, Chateau, Challenger, Tuscany, Axis, Vegas, Palazzo, Synergy, Quantum, Compass, Gemini, A.C.E, Alante, Precept, Greyhawk, and Redhawk trade names; and fifth wheels under the Redwood and DRV Mobile Suites trade names. It also provides conventional travel trailers and fifth wheels under the Montana, Springdale, Hideout, Sprinter, Outback, Laredo, Alpine, Bullet, Fuzion, Raptor, Passport, Cougar, Coleman, Kodiak, Aspen Trail, Voltage, Cameo, Cruiser, ReZerve, Sunset Trail, Zinger, Landmark, Bighorn, Sundance, Elkridge, Trail Runner, North Trail, Cyclone, Torque, Prowler, Wilderness, Shadow Cruiser, Fun Finder, Stryker, Sportsmen, Spree, Venom, Durango, SportTrek, Connect, Sportster, Sonic, Jay Flight, Jay Feather, Eagle, Pinnacle, Seismic, AR-One, Launch, Autumn Ridge, Travel Star, Highlander, Roamer, and Open Range trade names. In addition, the company offers equestrian recreational vehicle products with living quarters under the Premiere, Silverado, Ranger, Laredo, Trail Boss, and Trail Hand trade names; lightweight travel trailers and specialty products under the Camplite and Quicksilver trade names; and Class A motorhomes under the Insignia, Aspire, Anthem, and Cornerstone trade names, as well as provides aluminum extrusions and specialized component products. Company description from FinViz.com
In a weak economy Thor is kicking butt. The company reported earnings of $2.11 which rose 41.6% compared to estimates for $1.87. Revenue of $2.02 billion rose 57% beat estimates for $1.96 billion. Operating cash flow rose 26.2% and gross profits rose 45.5%.
Sales of towable travel trailers rose 52.6% and sales of motorized RVs rose 78.7%. There was no bad news in the Thor report.
Estimated earnings date September 4th.
With the company posting record earnings the stock spiked from $94 to $104 on June 6th. When the market dipped, shares only pulled back to $102. Over the last week they have returned to $106 and Monday's close was a four-month high.
Winnebago (WGO) reports earnings this week and that is going to remind investors how strong Thor's report really was. I believe we will see Thor break through that post earnings resistance and head back to the highs at $115.
Long Aug $110 call @ $3.20, see portfolio graphic for stop loss.
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