Option Investor
Newsletter

Daily Newsletter, Wednesday, 4/25/2018

Table of Contents

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

Market Wrap

Traders Take A Breather

by Richard Cox

Click here to email Richard Cox
Stock benchmarks closed little-changed in a trading day characterized by consolidation ahead of aftermarket earnings releases.


Markets began the day in very precarious territory after yesterday's sell-off. Downside pressure was seen early, but it looked as though traders in the market needed to take a breather before committing to large bearish positions. The Dow Jones Industrial Average was biggest gainer on the day, closing 0.2% higher. The loser on the day was the NASDAQ, which closed little-changed.

Aftermarket Earnings

After the closing bell, Facebook (FB) earnings came in at $1.69 per share, which was a massive beat on the $1.35 that was expected by analysts. Revenues also beat estimates. The number of daily users improved, and this suggests that the recent security scandals with Cambridge Analytica are having a limited impact on consumer sentiment. Share prices moved higher after the report, and FB next faces price resistance at $168.66.

Chipotle (CMG) rallied 10% after its earnings report showed menu price hikes improved the quarterly growth rates. This earnings report will be the first time CEO Brian Niccol will have an opportunity top address investors. Niccol's managerial impact is not be reflected in the report, but investors are very interested in hearing his upcoming plans for the brand.

Ford (F) reported first-quarter earnings that surpassed estimates, and the car-maker announced plans to stop selling low-demand sedans. Ford was helped by cost-cutting measures and lower taxes. Ford is in the process of restructuring its financial health characteristics. Rising energy prices have influenced the company's outlook in terms of the broader shift that is being seen in the direction of utility vehicles.

Semiconductor company Qualcomm (QCOM) gained after its earnings beat. The stock has been trading weakly in the midst of the high-profile fight to block takeover efforts by Broadcom (AVGO). Last week, Qualcomm announced plans to reduce 1,500 corporate jobs as a cost-cutting measure, and share values have been declining ever since. QCOM has also taken steps to reorganize its takeover bid for NXP Semiconductors.

AT&T (T) shares dropped after quarterly earnings missed analyst estimates. AT&T is still dealing with a trial that will determine whether or not the $85 billion bid for Time Warner will actually come to fruition.

Visa earnings came in at $1.11 per share, which was a nice beat on the $1.02 expected by analysts. This follows the broader trajectory of the financial sector, and this earnings report suggests strength in consumer markets.

Economic Calendar


MBA Mortgage Applications

In today's economic data, headline measures in the number of mortgage applications backed by the MBA showed small declines of 0.2% on the week. The report provides a gauge of sentiment in the housing market:


Today's report showed the purchase index held steady at 262.4. Market index was 398.5 against 399.4 prior. Refinancing index was 1,145.5 against 1,149.5 prior. The 30-year mortgage rate was 4.73% against 4.66% prior.

Crude Oil Inventories

The U.S. Energy Information Administration reported that crude supplies rose by 2.2 million barrels for the week ended April 20. Analysts had forecast a decline of 1.1 million barrels. Yesterday, the American Petroleum Institute showed an increase of 1.1 million barrels:


Stock Benchmarks

Dow Jones Industrial Average rose 0.2% to 24,082.66.


S&P 500 Index gained 0.2% to 2,639.39.


Nasdaq Composite was little-changed at 7,003.74.


Individual Stocks

Jet-maker Boeing (BA) released first-quarter earnings with the company showing an adjusted performance of $3.64 per share. This was well above the $2.58 per share reading that was expected by the analyst consensus. Revenues also surpassed Wall Street estimates, and these trends looks set to continue with Boeing raising its full-year forecast.

Twitter (TWTR) reported quarterly earnings and the report showed performances 4 cents per share above analyst estimates (adjusted profit of 16 cents a share). Revenues came in well above expectations and the company reported additions of 336 million monthly average users. Twitter and Facebook (FB) have probably received more free advertising then any other company in history. But recent media headlines have been negative (and called into question the dominance of many of these leading tech/social networking names). Trend activity in these areas of the market should be very interesting into the second half of this year.

NBCUniversal and CNBC parent Comcast (CMCSA) has completed its purchase offering for Sky News in the U.K. The deal is planned to be worth $31 billion and this was enough of an incentive for Sky to withdraw prior plans to complete a takeover bid by 21st Century Fox. Nothing is completed as of yet, and Sky says the company is still open to further discussions from all interested. All of the attention here has been heightened since Comcast reported adjusted quarterly profit of 62 cents per share in its latest quarterly report. This performance beat analyst estimates by 3 cents per share.

Viacom (VIA) reported adjusted quarterly earnings of 92 cents a share. This is 13 cents per share higher than the consensus expectation. Revenues were also higher than estimates. The quarterly numbers were helped by strong operational improvements at Viacom's Paramount movie studio.

Texas Instruments (TXN) released quarterly figures with adjusted quarterly profits of $1.21 per share (10 cents per share higher than the analyst expectations. The chip making company posted revenues that were better than estimates, helped by improvements in the company's industrial and automotive segments. Guidance looks good, as the company also forecast improved earnings in the current quarter.

Warehouse retailer Costco Wholesale (COST) raised quarterly dividends to 57 cents a share (from 50 cents a share previously). Supermarket operator Supervalu (SVU) announced plans to sell eight U.S. distribution centers (for $843 million) in a move that comes after aggressive moves from activist investors to drive attention to the stock. Herbalife (HLF) shareholders approved branding changes and a new name for the company. The new outfit will be called Herbalife Nutrition in an attempt to attract more millennial customers to its brand. The stock will continue trading under the HLF ticker symbol.

Health insurer Anthem (ANTM) reported adjusted quarterly profits of $5.41 a share, which was well above the consensus estimates of $4.88 per share. Revenues were lower, however, but bottom-line figures were aided lower medical costs. Anthem also raised full-year guidance to better levels. Shire (SHPG) announced that the company is willing to accept a takeover bid from Japan's Takeda Pharmaceutical. This is the fifth time an agreement has been attempted (four prior bids were rejected). Takeda is willing to pay $64 billion for the U.K. pharma company.

Amgen (AMGN) released its earnings report and the numbers beat estimates by a massive 24 cents per share. The report showed that adjusted quarterly earnings came in at $3.47 a share. Amgen's revenue also beat estimates, as new product sales were much better than anticipated. Edwards Lifesciences (EW) reported earnings that beat estimates by 11 cents per share. The medical products company reported adjusted quarterly earnings of $1.22 per share. Revenues were lower than forecasts, and the company issued weak guidance for this current quarter. The poorer revenue results were driven by declining sales for transcatheter heart valves.

Casino operator Wynn Resorts (WYNN) released adjusted quarterly earnings of $2.30 a share. This was a significant beat, as the analyst estimates were 32 cents per share lower. Revenues were lower than forecasts. Wynn raised quarterly dividends to 75 cents a share (from 50 cents per share previously). Lighting products company Cree (CREE) also released earnings and beat estimates four-fold. Adjusted quarterly earnings came in at 4 cents a share, and revenues also surpassed estimates. Cree says its expectations are high for coming quarters, as guidance continues to improve for the company.

Market Outlook

As a sector to watch, I think it is important to highlight the banking stocks as there have been some interesting developments in recent weeks. Most of the major banks had a mind-blowing earnings season, and this has not really been reflected on the charts. Sector positives include: higher interest rates, more trading volatility. If you think markets are going to be more erratic this year than they were last year, then it is possible the bank stocks could start to work as safe haven instruments. This supports the outlook for most of the key names in the sector, and we are already seeing EPS results that are the strongest since the financial crisis:


Earnings were strong, but there were still areas of weakness in the sector. Fixed-income numbers were far below estimates:


Fortunately (for banking bulls), rising market volatility led to much higher numbers in trading transaction revenues. This could wind up being the key determinant in whether rallies are likely to unfold into the second half of this year.


In addition to this, the prospect of rising interest rates at the global level suggests that banks will be able to expand margins and continue posting strong revenue performances. We are seeing some nice confirmations of the fundamental trends on the charts themselves, as the Financial Select Sector SPDR ETF (XLF) is threatening to break its 2007 highs:


BAC reported first-quarter 2018 earnings of $0.62 per share on 4/16/18. This beat the $0.59 consensus estimates. BAC has had some difficulty making a sustained break above the $30 level. We are also coming into some major Fibonacci resistance on the longer-term charts, and so any breaks higher from here in BAC could be forceful.


Citigroup (C) reported first-quarter 2018 earnings of $1.68 per share on 4/13/18. This beat the $1.61 consensus. C is still trading below its longer-term resistance levels, suggesting there is still value to be had in the stock.


Wells Fargo (WFC) beat earnings expectations in its most recent reports but there are concerns that the bank will be forced to revise its numbers as more details of regulatory talks become clear. The number that has been floating around through the financial news headlines has been $1 billion for the total settlement payout that will be required for Wells Fargo. The bank reported 5.5% gains for the first-quarter, while net incomes were seen at $5.9 billion.

This was a full $1.12 per share better than the average analyst expectation of $1.06. Revenues were also much better than estimates (at $21.93 billion). Forecasts were calling for something closer to $21.73 billion. So far, the market reaction has been lackluster but this could point to some interesting long-term value once the bank emerges from its banking fraud scandals.


Morgan Stanley (MS) reported first-quarter 2018 earnings of $1.45 per share on 4/18/18. This beat the $1.25 consensus. It can be argued that MS had the strongest quarterly performance in the group, and the fact that earnings beats have been this widespread suggests we will continue to see strength in the sector as a whole.


Moving Ahead

The early trading activity today was something like the aftershock of an earthquake. There was a bit of a tremor early-on, but that selling pressure abated. This is probably because the bears lost confidence, and chose instead to wait for the tone set in the aftermarket earnings releases. The reports were mostly positive, and this could help improve the direction in tomorrow's trade.

Overall, the market environment is still shaky - and there is a possibility for declines on any hint of uncertainty. For options traders, it makes most sense to simply focus on earnings and let the rest of the market noise fade from the purview.

Tomorrow, Microfost (MSFT) and Amazon (AMZN) will report earnings after the closing bell. These releases will be an important indicator of the strength seen in the tech space after Facebook's upside earnings surprise in today's session. Markets are watching trend activity closely, and this means heightened potential or follow-through if we see breakout price activity in either direction.

Limit risk, exercise patience, maximize returns

Richard Cox


New Option Plays

Go With Earnings Strength

by Jim Brown

Click here to email Jim Brown

Editors Note:

Companies that were crushed after strong earnings are excellent candidates. CAT grew earnings 120% and revenue 31%. What else could you ask for? .

 

New positions are only added on Wednesday and Saturday except in special circumstances.


NEW DIRECTIONAL CALL PLAYS

CAT - Caterpillar - Company Profile

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives for heavy and general construction, rental, quarry, aggregate, mining, waste, material handling, oil and gas, power generation, marine, rail, and industrial markets. Its Construction Industries segment offers backhoe, compact, track-type, small and medium wheel, knuckleboom, and skid steer loaders; small and medium track-type, and site prep tractors; mini, wheel, forestry, small, medium, and large track excavators; and motorgraders, pipelayers, telehandlers, cold planers, asphalt pavers, compactors, road reclaimers, and wheel and track skidders and feller bunchers. The company's Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactor, dragline, large wheel loader, machinery component, track and rotary drill, electronics and control system, work tool, hard rock vehicle and continuous mining system, scoop and hauler, wheel tractor scraper, large track-type tractor, and wheel dozer products; longwall, highwall, and continuous miners; and mining, off-highway, and articulated trucks. Its Energy & Transportation segment offers reciprocating engine powered generator set and engine, integrated system, turbine, centrifugal gas compressor, diesel-electric locomotive and component, and other rail-related products and services. The company's Financial Products segment offers finance for Caterpillar equipment, machinery, and engines, as well as dealers; property, casualty, life, accident, and health insurance; and insurance brokerage services, as well as purchases short-term trade receivables. Its All Other operating segments provides parts distribution and digital investments services. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Peoria, Illinois. Company description from FinViz.com.

In mid February, CAT reported their rolling 3-month sales rose 34% globally. There was a 23% ris ein North America. Resource segment sales rose 49%, construction sales +30%, rnergy and transportation rose 16%, power generation +8%, industrial sales +13% and oil and gas sales +27%. This company is in the sweet spot of the global economic boom. The report the rolling 3-month average to smooth out the big ticket sales spikes from month to month.

CAT declared a 78-cent dividend payable May 19th to holders on April 23rd. They have paid higher dividends to shareholders for 24 consecutive years. The earnings date changed to April 24th. Buckingham Research reiterated a buy with a $170 price target saying they were in the early stages of a multiyear earnings expansion story.

On April 24th, CAT reported earnings of $2.82 that rose 120% on a 31% rise in revenue to $12.86 billion and they raised guidance. Analysts were expecting $2.11 and $11.58 billion. Everything was great with the stock spiking 4.5% on the news. Unfortunately, on the conference call the CEO said operating margins would be lower for the rest of 2018 because of targeted investments to continue expanding their offerings and services, consistent with our strategy for long-term growth. Shares immediately crashed from the $161 high to close at $144.

I believe this is a buying opportunity. Earnings rose 120%. Not 10% or 20% but 120%. Revenue rose 31%. This company is knocking the cover off the ball. They raised guidance but said "margins" would decline because of investments. That is bullish for real investors.

There is decent support at $144 and with those earnings I would be shocked if the stock declined significantly. CAT has not traded below the 200-day since May-2016.

I am reaching out to August so the options will retain their premium if we get some additional market volatility. Expiration is after the July earnings so that will also support premiums. We can buy time but we do not have to use it. If you want to buy the July strike it is about $1 cheaper but it will evaporate faster since it expires before earnings.

Buy Aug $155 Call, currently $5.05, stop loss $137.65.


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Lackluster Performance

by Jim Brown

Click here to email Jim Brown

Editors Note:

After dropping sharply at the open the indexes battled back to even but it was uninspiring. It was a triple digit rebound for the Dow but the index only managed to gain 59 points at the close. The Nasdaq struggled to only lose 3 points and the S&P pulled out a minor 5 point gain. Given the 700 point Dow drop intraday on Monday, we should have had a decent rebound today. It did not appear and trading was erratic. Volume was moderate at 6.9 billion shares. We could still have a rebound on Thursday since the indexes failed to give up much ground today. That may provide some encouragement to the bulls.



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.





Current Position Changes


CVLT - Commvault
The long position was stopped at $68.85.

NTNX - Nutanix
The long position was stopped at $49.85.

V - Visa
The long position was stopped at $120.50.



If you are looking for a different type of option strategy, try these newsletters:

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Iron Condors = Couch Potato Trader

Long and short equity trades = Premier Investor


Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.


BULLISH Play Updates

CVLT - Commvault - Company Profile

Comments:

No specific news. Just enough decline with the market to stop us out.

Original Trade Description: March 21st.

Commvault is a leading provider of data protection, cloud and information management solutions, helping companies worldwide activate and drive more value and business insight out of their data. With solutions and services delivered directly and through a worldwide network of partners and service providers, Commvault solutions comprise one of the industry's leading portfolios in data protection and recovery, cloud, virtualization, archive, file sync and share. Commvault has earned accolades from customers and third party influencers for its technology vision, innovation, and execution as an independent and trusted expert. Without the distraction of a hardware business or other business agenda, Commvault's sole focus on data management has led to adoption by companies of all sizes, in all industries, and for solutions deployed on premise, across mobile platforms, to and from the cloud, and provided as-a-service. Commvault employs more than 2,700 highly- skilled individuals across markets worldwide. Company info from Commvault.

The amount of data stored in computer systems doubles every six months and all that data has to be backed up, normally in several different places. Enterprise customers need to be able to access archived data, ensure its redundancy and analyze the data contained in these massive databases. This is no longer a task for home grown backup systems. Enterprise customers have to have a reliable suite of applications to manage this valuable resource.

Commvault recently partnered with HP Enterprise to be park of their enterprise suite of products. This is going to further expand their market share and name recognition.

The missed by a penny on Q4 earnings and shares tanked. They quickly recovered and appear poised to break out again.

Update 4/11: Comvault announced expanded migration, management, protection and activation of data on Microsoft Azure Stack.

Update 4/21: Comvault extended data protection for government customers using the Amazon cloud. According to Comvault, "Now U.S. government agencies, System Integrators (SI) and private sector contractors can move, manage and use cloud-based data and workloads with increased security, speed, flexibility and reliability."

Position 3/22/18:
Closed 4/25: Long May $60 call @ $2.60, exit $8.50, +$5.90 gain.


DXCM - DexCom - Company Profile

Comments:

No specific news. Very minor decline.

Original Trade Description: April 1st.

DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally. The company offers its systems for ambulatory use by people with diabetes; and for use by healthcare providers. Its products include DexCom G5 mobile continuous glucose monitoring system to communicate directly to patient's mobile device; DexCom G4 PLATINUM system for continuous use by adults with diabetes; and DexCom Share, a remote monitoring system. DexCom, Inc. has a collaboration and license agreement with Verily Life Sciences LLC to develop a series of next-generation CGM products. The company markets its products directly to endocrinologists, physicians, and diabetes educators. DexCom, Inc. was founded in 1999 and is headquartered in San Diego, California. Company description from FinViz.com.

DexCom is the leader in continuous glucose monitoring. Last week the FDA approved a new device called the DexCom G6 CGM System. This device can be used by itself of in conjunction with other devices like automated insulin dosing systems. This is the first device of its type to be approved by the FDA.

The features include:

No more finger pricks for testing.
A 28% lower profile than other CGM devices.
Acetaminophen blocking for no medication interference.
Predictive low blood sugar alerts to prevent hypoglycemia before it occurs.
Extended 10-day sensor, 43% longer than prior sensors.
Automatically sends glucose readings to a monitor or smart phone/watch every 5 minutes.
Mobile app sends the monitoring information to up to 5 people.
Customizable alarms and alerts for high and low blood sugar.

I am not a diabetic but I read several comments from diabetics who were praising this device. Analysts believe this could translate into millions of patient upgrades in the coming years. LINK

Investors appear to be excited by the news with the stock rising for the last month with very little volatility related to the market. They are up $20 over that period but are showing no signs of exhaustion. The FDA approval was last Wednesday. Shares are at resistance at $75 and a breakout here could see an extended rally.

Update 4/4/18: Everything was going very well until Goldman Sachs initiated coverage with a sell rating and Guggenheim initiated with a neutral rating on Wednesday. Shares declined -$2.50 on the new coverage. The new coverage was skillfully done with the stock at the resistance highs.

Position 4/2/18:
Long June $80 call @ $3.20, initial stop loss $68.35.


JPM - JP Morgan - Company Profile

Comments:

No specific news. Yields on the 10-year rose to 3.02% and financials should have been positive but the market was mixed on earnings surprises.

Original Trade Description: February 17th

JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. The Consumer & Community Banking segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; residential mortgages and home equity loans; and credit cards, payment services, payment processing services, auto loans and leases, and student loans. The Corporate & Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, and capital-raising in equity and debt markets, as well as loan origination and syndication; treasury services, such as cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research services. It also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The Commercial Banking segment offers financial solutions, including lending, treasury, investment banking, and asset management to corporations, municipalities, financial institutions, and nonprofit entities, as well as financing to real estate investors and owners. The Asset & Wealth Management segment provides investment and wealth management services across various asset classes, such as equities, fixed income, alternatives, and money market funds; multi-asset investment management services; retirement services; and brokerage and banking services comprising trusts, estates, loans, mortgages, and deposits. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York. Company description from FinViz.com.

Banks make money by acquiring deposits and paying minimum interest rates while lending the money out at higher rates. When interest rates rise the rates on the loans match the jump in rates but the interest paid on deposits creeps up at a slower rate. For a bank like JP Morgan or Citigroup, each quarter point rise in rates is worth hundreds of millions of dollars in interest. The Fed is expected to hike rates at least 3 times in 2018 and possibly 4 times for a full 1% increase. This is a goldmine for JP Morgan.

In the past, the Fed has always believed that the ideal interest rate is 2% above the core rate of inflation. With the core rate approaching 2% that means a 4% Fed funds rate, which equates to a lending rate for banks at about 6%. Since the banks are coming off a Fed rate of less than 1% and doing well at those levels, a jump to 2.25% by the end of 2018 would double their interest income.

None of this is really important for a short term option trade but investors buy stocks for the future. JPM has a fortress balance sheet and They stand to make billions from the Fed rate hike cycle. That means JPM is a buy today and we are going to jump in before they make a new high.

With Jay Powell providing testimony to the House on Feb 28th, the focus for the next week will be on what he might say about raising rates. Those expectations should cause bank stocks to rise. The next Fed meeting is March 20/21st and they are widely expected to hike at that meeting. That expectation should lift bank stocks ahead of that meeting.

I considered using the April options. However, with the potential for market volatility, it would be better to use the June strikes because they will hold their value longer. We will exit this position before earnings. We are buying time but we are not going to use it.

Update 2/28/18: On Tuesday, the CFO raised the outlook on earnings saying pretax profits could rise by 17.5% annually over the next several years. He said pretax net income could rise to a range of $44-$47 billion over three years, up from $24 billion in 2017.

Update 3/7/18: However, because of their past relationship JPM probably has a lead in the move by Amazon to establish hybrid checking accounts with the Amazon brand. The company sent out requests for proposals earlier this year but JPM probably has a head start since they have already partnered with Amazon on the health care project.

Update 3/16/18: It was 10-years ago Friday that JP Morgan announced it was buying Bear Stearns for $2 a share. This was less than the value of the Bear Stearns real estate. JPM along with the Fed kept the bank from imploding completely but began an 8-year series of litigations that cost JPM billions. In the end the acquisition of the traders and clients propelled JP Morgan to overtake Goldman Sachs as the biggest trader in bonds. While the acquisition was painful it has helped increase JPM's annual profits from $14 billion to $24 billion over the last ten years.

Update 4/14/18: The bank reported earnings that rose 35% to an all time high on a 10% increase in revenue. The company reported earnings of $2.37 that beat estimates for $2.28. Net revenue was $28.52 billion beating estimates for $27.68 billion. Net interest income rose 9% to $13.5 billion. Lower revenue from investment banking (-7%) was a serious drag on performance.

Position 2/20/18:
Long June $120 call @ $3.17, see portfolio graphic for stop loss.


KFY - Korn Ferry Intl - Company Profile

Comments:

No specific news. Only a minor 12 cent decline.

Original Trade Description: April 21st.

Korn/Ferry International, together with its subsidiaries, provides talent management solutions worldwide. It operates through three segments: Executive Search, Hay Group, and Futurestep. The company provides executive recruitment services that are used to fill executive-level positions, such as board directors, chief executive officers, chief financial officers, chief operating officers, chief information officers, chief human resource officers, and other senior executive officers for clients in the consumer, financial services, industrial, life sciences/healthcare provider, technology, and educational/not-for-profit industries. It also offers talent strategy, succession management, and leadership development, as well as rewards, motivation, and engagement solutions to assist clients with their ongoing assessment, compensation, and leadership development efforts. In addition, the company provides various talent acquisition solutions, including recruitment process outsourcing, project recruitment, professional search, talent consulting and employer branding, and individual professional search and consulting services. It serves public and private companies, and middle market and emerging growth companies, as well as government and non-profit organizations. Korn/Ferry International was founded in 1969. Company description from FinViz.com.

Earnings expected on June 5th.

The company reported Q4 earnings of 70-cents that beat estimates for 59 cents. Revenue was $447.6 million and beat estimates for $416.5 million. They guided for the current quarter for earnings of 69-73 cents with revenue of $448-$462 million. Analysts were expecting $436.9 million.

With the earnings, the CEO stated clearly their current mission. "Today Korn Ferry is truly a global organizational consulting firm. We help companies design their organization - the structure, the roles and responsibilities, as well as how they compensate, develop and motivate their people. As importantly, we help organizations select and hire the talent they need to execute their strategy."

When you hear that Nike terminated 9 of their top level employees you can bet they are turning to Korn Ferry for help in replacing them. This is the top level go to company for executive search and placement.

With employment very tight, a company cannot just place an ad in a newspaper. Top level people are not hired from the paper. They are shopped, tracked and monitored throughout their entire career.

The company is benefitting from the tight labor market and business has never been better.

Position 4/23/18:
Long June $55 call @ $2.00, see portfolio graphic for stop loss.


NTNX - Nutanix Inc - Company Profile

Comments:

No specific news. Big drop with the Nasdaq to stop us out.

Original Trade Description: April 1st.

Nutanix is a global leader in cloud software and hyperconverged infrastructure solutions, making infrastructure invisible so that IT can focus on the applications and services that power their business. Companies around the world use Nutanix Enterprise Cloud OS software to bring one-click application management and mobility across public, private and distributed edge clouds so they can run any application at any scale with a dramatically lower total cost of ownership. The result is organizations that can rapidly deliver a high-performance IT environment on demand, giving application owners a true cloud-like experience. Company description from Nutanix.

The company posted a net loss of 39 cents compared to 54 cents in the year ago quarter. Free cash flow rose from $7.1 million to $32.4 million. Revenue rose 44% to $286.7 million while billings rose 57% to $227.4 million. They had 8,870 customers at the end of the quarter, a 65% increase. The number of customers billing more than $1 million a year rose 33% to 541.

In late March Goldman Sachs removed Nutanix from their conviction buy list because of the strong gains. Shares faded with the market but have now begun to rebound.

Update 4/18: The company said 74% of federal government customers had switched to the AHV hypervisor in 2017. Enterprise cloud OS nodes sold to federal agencies are leveraging AHV compared to 30% adoption worldwide. The company said they signed 20 new federal government customers with billings of more than $1 million each in 2017. That was an 82% increase from the prior year. Shares closed at a new high.

Position 4/16/18:
Closed 4/25: Long June $57.50 call @ $4.27, exit $2.50, -1.77 loss.
Optional position:
Closed 4/25: Short June $70 call @ $1.32, exit .60, +.72 gain
Net loss $1.05.


RHT - Red Hat - Company Profile

Comments:

No specific news. Big drop at the open with the Nasdaq but recovered most of it.

Original Trade Description: April 11th.

Red Hat, Inc. provides open source software solutions to develop and offer operating system, virtualization, management, middleware, cloud, mobile, and storage technologies to various enterprises worldwide. It offers infrastructure-related solutions, such as Red Hat Enterprise Linux, an operating system platform that runs on hardware for use in hybrid cloud environments; Red Hat Satellite, a system management offering that helps to deploy, scale, and manage in hybrid cloud environments; and Red Hat Enterprise Virtualization, a software solution that allows customers to utilize and manage a common hardware infrastructure to run multiple operating systems and applications. The company offers application development-related and other technology solutions, such as Red Hat JBoss Middleware, a solution for developing, deploying, and managing applications; integrating applications, data, and devices; and automating business processes in hybrid cloud environments; Red Hat cloud offerings, a software solution that enables customers to build and manage various cloud computing environments; Red Hat Mobile, a software development platform that enables customers to develop, integrate, deploy, and manage mobile applications for enterprises; and Red Hat Storage, a software solution that enables customers to manage large, unstructured, or semi-structured data in hybrid cloud environments. It also provides consulting, support, and training services; and real-time operating system, distributed computing, directory services, and user authentication. Red Hat, Inc. has a collaboration with Wipro Limited to set up a cloud application factory that offers developers and IT teams a methodology for application modernization across public, private, and hybrid clouds. The company was formerly known as Red Hat Software, Inc. and changed its name to Red Hat, Inc. in June 1999. Red Hat, Inc. was founded in 1993 and is headquartered in Raleigh, North Carolina. Company description from FinViz.com.

Red Hat saw revenue rise 22.8% to $772.3 million in Q4 to beat estimates of $753 million. Earnings of 91 cents beat estimates by 10 cents. The company raised revenue guidance for Q1 but maintained earnings guidance. BMO raised the target price to $180 and Stifel boosted their price to $172.

Shares broke through strong resistance at $156 on Tuesday to close at a new high but gave back a little in Wednesday's weak market.

Red Hat has a great chart over the last year and now that it is in new high territory, the gains should continue. This is a true growth stock in the tech sector.

Position 4/12/18:
Long June $165 call @ $4.70, see portfolio graphic for stop loss.
Optional Short June $175 call @ $2.10, see portfolio graphic for stop loss.
Net debit $2.60.


V - Visa - Company Profile

Comments:

Visa reported earnings of $1.11 compared to estimates for $1.01. Revenue of $4.07 billion beat estimates for $4.81 billion. The company raised guidance for the full year from high single digit revenue growth to low double digits. Shares dropped at the open to stop us out.

Original Trade Description: February 8th

Visa Inc. operates as a payments technology company worldwide. The company facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a processing network that enables authorization, clearing, and settlement of payment transactions; and offers fraud protection for account holders and assured payment for merchants. The company also offers gateway services for merchants to accept, process, and reconcile payments; manage fraud; and safeguard payment security online, as well as processing services for participating issuers of visa debit, prepaid, and ATM payment products. In addition, it provides digital products, including Visa Checkout that offers consumers an expedited, and secure payment experience for online transactions; and Visa Direct, a push payment product platform, that allows businesses, governments, and consumers to use the Visa network to transfer funds from an originating account to another via a debit, prepaid, or credit card number, as well as Visa token service that replaces the card account numbers from the transaction with a token. Further the company offers corporate (travel) and purchasing card products, as well as value-added services. It provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brands. Visa Inc. was incorporated in 2007 and is headquartered in San Francisco, California. Company description from FinViz.com.

Update 4/18: Visa declared a 21-cent quarterly dividend payable June 5th to holders on May 18th.

Position 2/9/18 with a Visa trade at $112.50:
Closed 4/25: Long June $120 Call @ $4.15, exit $4.58, +.43 gain.



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