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Tempting Tuesday – Introducing our Dividend Portfolio

Image result for cumulative return dividend paying stocks"Dividends are very nice.

Over time, dividend-paying stocks tend to outperform the non-paying stocks by a pretty wide margin and they are an excellent way to build a retirement portfolio – even if you are off to a bit of a late start.  That's because the dividends themselves are kind of like an investing discipline – forcing you to take profits off the table on a regular basis or at least re-investing the profits into a conservative stock

Dividend stocks tend to be the one investors run to in times of trouble, making them outperformers when markets turn ugly as well.  On Friday, we initiated a Dividend Stock Portfolio, starting with a virtual $100,000 and our first 3 trade ideas were for Ford (F), Signet Jewelers (SIG) and AT&T (T) and they haven't moved much yet so it's very easy to catch up with us:

Of course, dividend stocks aren't supposed to move that much, we're not in them for the gains (hence the low strikes on the short covered calls), we're in it for those dividend payouts:

  • F is a net $5,780 entry that will be called away at $7,000 over $7 for a $1,220 (21%) gain and 0.60 ($600) per year in dividends is another 21% over two years so 42% return potential ($2,420) if Ford manages not to drop 20%.
  • SIG is a net $5,650 entry that will be called away at $13,000 for a $7,350 gain (130%) and $1.48 ($1,480) per year in dividends is another 26.2% over two years so 182.4% return potential ($10,310) if SIG does not fall $4.75 (26.7%).
  • T is a net $29,450 entry that will be called away at $35,000 over $35 for a $5,550 (18.5%) profit and the dividends are $2.04 ($2,040) per year which is another 13.8% over 2 years so 32.3% return potential ($7,590) on a very conservative target (10% below the current price).

Notice our big cash commtiment is on AT&T because it's a nice, safe stock to play and we'll pick up $7,590 in a stock we're pretty sure we'll keep for life but, overall, just these 3 stocks are going to make us $20,320 in two years if all goes well and that's already 20% of our $100,000 portfolio using just 1/6 of our $200,000 margin buying power.  

While these returns (not SIG) may seem very boring compared to our other portfolios, Dividend Portfolios are meant to play it safe for the long haul and, even in this 10-year market run of the S&P, with all that help from the Fed, we've only had two years (including this one) where the S&P 500 returned 20%:

Year Average

Closing Price
Year Open Year High Year Low Year Close Annual

% Change
2019 2,866.52 2,510.03 3,039.42 2,447.89 3,039.42 21.24%
2018 2,746.21 2,695.81 2,930.75 2,351.10 2,506.85 -6.24%
2017 2,449.08 2,257.83 2,690.16 2,257.83 2,673.61 19.42%
2016 2,094.65 2,012.66 2,271.72 1,829.08 2,238.83 9.54%
2015 2,061.07 2,058.20 2,130.82 1,867.61 2,043.94 -0.73%
2014 1,931.38 1,831.98 2,090.57 1,741.89 2,058.90 11.39%
2013 1,643.80 1,462.42 1,848.36 1,457.15 1,848.36 29.60%
2012 1,379.61 1,277.06 1,465.77 1,277.06 1,426.19 13.41%
2011 1,267.64 1,271.87 1,363.61 1,099.23 1,257.60 0.00%
2010 1,139.97 1,132.99 1,259.78 1,022.58 1,257.64 12.78%

In fact, if we had made 20% a year for the last 9 years consistently, we would have turned 1,139.97 into 5,881.99 – miles past the S&P's current 3,039.42 because, as I teach our Members, CONSITENTLY making money is much more important than making big returns erratically (see: "The Secret to Consistent 20-40% Annual Returns"). 

That's our system for turning any stock into a "dividend-payer" by selling calls and it's the check-list we're running through on all our trading ideas as we begin to move some of our CASH!!! off the sidelines.  In fact, that video is from 2013 and we were using Barrick Gold (GOLD) as an example and it was ABX at the time at $19 and, over the past 7 years, GOLD has moved between $10 and $20 and it's now $16.72 so the stock has gone nowhere but it's paid $7.48 in VERY erratic dividends and, much more importantly, we had the opportunity to sell $6 (easily) of calls each year for 6 years for another $36 so the total returns from $19 were $43.50 (228%) less the $2.30 drop in the stock price (12%) so still very nice returns fo 6 years.

And, of course, the key is to re-invest those returns over time to really boost the gains.  I used the example of our AT&T (T) play in yesterday's Morning Report to illustrate the power of re-investing the profits over time.  

Our goal for the week is to add 3 more stocks to our Dividend Portfolio, which will make us about 1/3 invested (we usually don't go more than 2/3 total) and we'll give these a while to run before adding more but we should be well on our way to 20% annual returns at that point and, if that's going well for about 6 months, THEN we can go for 40%!


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  1. Good morning!

  2. Good Morning!

  3. Had to add more lines to the Nadaq! Usually a sign of upcoming corrections.

  4. I really like the idea of the dividend portfolio. The big trades that return 100% a year are great but more risky that some people might be willing to accept. Like you say Phil – getting 10-20% a year every year beats these big years mixed in the middle of mediocre ones! That's one reason people were attracted to Maddoff – they wanted to have the regular 10% over the once in while 30%! 

  5. Good morning!  

    Markets flat ahead of the Fed, new doesn't matter much with that overhang and people are still salivating over a China Trade Deal that's perpetually about to be signed   

    Markets largely expect another quarter-percentage-point rate cut. It is the Fed’s next step that is uncertain, and investors will closely watch for clues.18

    GM just lowered guidance by $3Bn (due to the strike) and the stock is up 5% – there's really no sense at all in bidding against this market…  F recalled 320,000 cars and they are up too!

    General Motors lowered its full-year profit outlook, saying the 40-day strike at its U.S. factories wiped out nearly all its free cash flow for the year and will cost the Detroit auto maker close to $3 billion in lost earnings.4

    It does look like we'll need a bigger big chart if this keeps up and the NYSE may be confirming for a change.  

    PFE raised guidance – that's a dividend-payer we should add (wish we did it yesterday but, oh well).  

    U.S. Home Price Growth Ticks Up

    Average national home prices grew 3.2% in the year ending in August, according to the S&P CoreLogic Case-Shiller National Home Price Index, up slightly from 3.1% the prior month.41 minutes ago

  6. PFE only pays $1.44 (3.86%), they used to pay closer to 5% so that's a shame.  The stock is $38.68 now and the 2022 $35 calls are $5.50 and the $35 puts are $4 so net $29.18 on, say, 500 shares ($14,590), called away at $35 ($17,500) is a $3,090 gain (21.1%) and the dividends are another $1,440 (9.8%) puts it a bit below our goal (like T) but we have to weigh out the safety of the pick as well, which counts for something.  I'd say strong contender but not a definite winner. 

    There's no law, by the way, that says we can't just sell 5 of the 2022 $35 puts for $4 ($2,000) and let that be that on the trade.  People get hemmed in by "definitions" and, just because it's a dividend portfolio, doesn't mean we're FORCED to buy stock all the time.  We wish we hadn't missed the pop in PFE, we WISH we could buy in at $31 and the dividend is $560 less than the short put and the margin (ordinary) is only $2,059 to collect $2,000 – I think that's efficient enough that we should play it that way instead.

    So, officially, for the Dividend Portfolio, let's sell 5 PFE 2022 $35 puts for $4 ($2,000).

  7. NLY is paying out $1 at $8.89 and used to pay $1.20 but $1 is 11.25% and they were $10 in 2014 but $20 back in 2007 so the question is, would be be able to ride out a move to $5 if it happens?  There's nothing wrong with the company, Mortgage REITs are just out of favor but this management team has done a great job riding out everything the market could throw at them.

    The problem MReits have in low-rate environments is that all their old paper at 5% or higher ends up getting refinanced at 3.5% (usually by someone else) and their new loans can't get 5% so their margins tend to shrink and less margin means less profit as it's a pretty straightforward lending business.  Also, we're at the low end of the cycle in defaults and that hurts an MREIT too when it begins to rise. 

    So, for those reasons, NLY's market cap is now under $13Bn, even though they are making about $1.5Bn a year.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 4,619 -115 1,159 2,267 2,808 2,283 -1,644 3,926 4,297 -13.1%
    Operating Profit $m 3,738 -837 463.8 1,431 1,576 51.8 -4,505     -57.5%
    Net Profit $m 3,730 -842.1 466.6 1,434 1,570 54.4 -4,495 1,542 1,582 -57.1%
    EPS Reported $ 3.74 -0.96 0.42 1.39 1.37 -0.062 -3.32      
    EPS Normalised $ 3.77 -0.96 0.43 1.34 1.37 -0.027 -3.28 1.05 1.07  
    EPS Growth % +101.1     +211 +1.8       +2.58  
    PE Ratio x           n/a n/a 8.50 8.29  
    PEG x           n/a n/a 3.29 0.82

    Since I have a lot of confidence in them being around for the long-haul (they are 3-4 times bigger than the average MREIT with solid management) and since they do have long-term options, this is one I'm comfortable adding to our Dividend Portfolio:

    • Buy 2,000 shares NLY for $8.92 ($17,840)
    • Sell 20 2022 $7 calls for $2.15 ($4,300) 
    • Sell 10 2022 $10 puts for $2.50 ($2,500) 

    That makes our net entry just $11,040 or $5.52/share so, even if we are forced to buy 1,000 more at $10 ($10,000) that's $21,040 for 3,000 shares or $7.01/share (and then we'd sell more calls, of course).  The biggest headache here is that the option premium is only about 0.20, which is close to the dividend so you may get called away on dividend days and have to re-establish but I'd rather collect a little less and have the protection – just in case.

    Meanwhile, if all goes well, we get called away (we'll roll, of course) at $14,000 for a $2,960 (26.8%) gain on the stock plus another $4,000 (36.2%) in dividends over 2 years is a very sexy 63% return but most likely we'll be under $10 and have to roll the short puts along – but that doesn't stop us from pocketing the money!  

  8. Phil I see you slowly but surely infringing on my armchair Trades. But reget all these stocks I already hold for a much lower price!!!!!!

  9. NLY earnings are the 30th, by the way and I think they can make the expected 0.25 so don't take less money for the short calls, we can probably do better after earnings.  With thinly traded long-term options you have to pick a price and just wait for the stock to move up a bit to get a fill.  

    It's often best to buy a 1/4 position and get your fill and then another 1/4 and get your fill, etc so you don't have too much uncovered stock.  It's the "panic" of our fellow buyers accepting low offers that can cause the option prices to be sub-optimal the day we make the call – especially on Top Trade Alerts (this one was).

    I generally put in Good to Cancel orders at strikes I want and forget about them until they fill.  If I check back in a week and I still haven't filled, THEN I might make adjustments but, most of the time, if you are patient, you can get the fills you want.  Of course earnings is too much of a risk – which is why scaling into your entries is also very helpful.  

    If NLY has terrible earnings and drops $1, for example, you can then buy the stock for $8 and sell the $7s for probably more premium than they have now. 

    Armchair/Yodi – You always play it safe!  We're just visiting your part of the market as we're still not ready to make more aggressive trades – so it's a good time to get our dividends on…  cool

  10. Halloween = Black Thursday….

    I'm making the prediction. I have a 99.999% of being wrong…. 

  11. A large holding for me.


    CNX Resources beats by $0.70, beats on revs  (7.52)

    Reports Q3 (Sep) earnings of $0.61 per share, $0.70 better than the S&P (.09) est.

  12. well I have 100 shares of TXRH because I like to eat there.  up 19% today after earnings  

  13. CNX/Albo – Very nice!

    TSLA finally calming down a bit.

    CMG might actually be consolidating for a move down!

    SKT is another one we HAVE to have in the Dividend Portfolio.  $17.22 is just $1.6Bn for my 2nd favorite REIT (especially with Sept 19th having passed, making ARR less fun to own).  These guys are good for $100M on the bottom line but a bit erratic as it costs them a year's worth of income to open a new mall but they are keeping occupancy around 96% in a tough environment so I expect them to be here for the long haul – which is very important for dividend plays.  

    Financial Summary
    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 384.8 418.6 439.4 465.8 488.2 494.7 490.3 459.6 441.4 +5.2%
    Operating Profit $m 127.7 118.7 144.5 151.3 125.1 108.6 101.7     -3.2%
    Net Profit $m 107.6 74.0 222.5 204 68.0 43.7 73.9 114.8 71.6 -16.5%
    EPS Reported $ 1.13 0.77 2.32 2.12 0.71 0.45 0.77     -16.6%
    EPS Normalised $ 1.14 0.85 1.05 2.06 1.02 0.99 0.84 1.34 0.83 -2.9%
    EPS Growth % +101.3 -25.2 +23.2 +95.7 -50.7 -2.7 -18.6 +36.0 -38.5  
    PE Ratio x           17.5 20.7 12.9 20.9  
    PEG x           0.49 0.57 n/a 3.94

    Dividends are a whopping $1.42 (8.2%) per share and I almost wish they wouldn't do that as it's $520M a year at that pace yet they are still dropping $250M of cash flow each year on top of that (depreciation always makes REIT finances very confusing so cash-flow is key). 

    I have done huge write-ups on SKT before (it was a Top Trade Alert on 8/1), banging the table all summer on this one so we're a little late to the party at $17+ but they do have nice option premiums so still worth playing.  For the Dividend portfolio, let's:

    • Buy 1,000 shares of SKT at $17.15 ($17,150)
    • Sell 10 2022 $15 calls for $3 ($3,000) 
    • Sell 10 2022 $15 puts for $3.20 ($3,200) 

    This is nice and simply as we're dropping our net entry to $10,950 ($10.95/share) and promising to buy 1,000 more for $15 ($15,000) to average $12.975 per share on 2,000 shares, which is $4.17 (24%) below the current price as our worst case (and they we sell more calls to make it lower!).  

    If all goes well, we get called away at $15+ (12.5% below the current price) with a $4,050 (36.9%) profit plus $2,840 (25.9%) in dividends for 62.8% in two years – not bad for a conservative entry!  

  14. That reminded me, SKT was one of our 5 Trade Ideas to Make $25,000 in 5 Months back on Aug 29th (compiling 5 picks we had made for this purpose over the last two weeks in Aug).  The premise was that we could cash out our portfolios and just take trades like these which used just $6,565 in CASH!!! and $26,659 in margin and were scheduled to make $33,603 (511%) if all went well.  

    Today is exactly 2 months (40%) in – so let's see how things are doing:

    • Sell 5 VAC April $85 puts for $5.70 ($2,850) 
    • Buy 7 VAC Jan $80 calls for $20 ($14,000) 
    • Sell 7 VAC Jan $90 calls for $12.80 ($8,960) ?

    The net cost of the spread is $2,190 and, if successful, it pays $7,000 at $90 or higher for a gain of $4,810 (219%) in 5 months, though the short puts won't expire until April – it should get us very close to our goal by January.   The ordinary margin requirement of the short puts is $5,280 so a pretty efficient way to make $4,810 in 5 months!  

    Well, we've totally blown through those very conservative targets (like the ones we're taking today!) and the Apr $85 puts are down to $1.80 ($900) and the Jan $80/90 spread is now $31.50/22.80 for net $8.70 ($6,090) so $5,190 out of a potential $7,000 is up $3,000 (136%) with just under $2,000 (38.5%) to go – still a keeper and even good for a new trade if you can stand making just 38.5% in 3 months (well, April for the puts) on a spread that's 130% in the money.

    This is why I tend to be anti-risk.  What's the point of taking risks when you can make this kind of money on fairly conservative plays?  

    Oh, I just realized that those were the 8/29 numbers and below that entry I had written:

    I don't want to make this a "you should subscribe" thing (although you really should by CLICKING HERE!) but I want to point out that the we caught a good bottom on this one and the original entries were:

    • Sell 5 VAC April $85 puts for $6.75 ($3,375) 
    • Buy 7 VAC Jan $80 calls for $16 ($11,200) 
    • Sell 7 VAC Jan $90 calls for $9 ($6,300)

    So that was net $1,525 and, at $2,190, this spread has already gained $665 (43%) in a week.  Aren't options fun?!?

    So better than I thought for us!  

    • Sell 10 WBA Jan $50 puts for $3.70 ($3,700) 
    • Buy 30 WBA Jan $47.50 calls for $5 ($15,000) 
    • Sell 30 WBA Jan $50 calls for $3.60 ($10,800) 

    The net cost of the spread is $500 in cash and the ordinary margin requirement for the short puts is $8,918 and, if WBA is over $50 on Jan 17th, the short puts expire worthless and the spread would be $7,500 in the money for a $7,000 (1,400%) gain in 5 months.  

    Another one I am sore from banging the table on.  Also a very conservative entry (I thought the market was going to correct and these were my deep-value plays) and now the Jan $50 puts are 0.75 ($750) and the $47.50/50 bull call spread is $9.20/$7 so $2.20 ($6,600) out of $2.50 but we passed earnings so net $5,850 is up $5,350 (1,070%) out of a possible $7,500 still has $1,650 (28%) left to gain if WBA holds $50 through Jan expirations (20th).  Again, I hear there are people who are thrilled to make 28% – they just don't seem to be Members here….  wink

    Meanwhile, we can take advantage of the opportunity and put our foot down at the $20 line (even though we're a bit below it now) and set up the following options play – the 3rd in our series of 5 Trade Ideas to Make $25,000 in 5 months:

    • Sell 10 LB Jan $17.50 puts for $2.80 ($2,800) 
    • Buy 25 LB Jan $15 calls for $3 ($7,500) 
    • Sell 25 LB Jan $17.50 calls for $1.85 ($4,625) 

    That's net $75 on the $6,250 spread so there's $6,175 (8,233%) upside potential if LB can get back over $20 by Jan 17th (option expiration day) and it's an efficient trade as the ordinary margin requirement is just $3,834 so a very good way to make $5,150 into the holidays! 

    I know – when am I going to give up on LB?  Nope, not happening yet.  We actually came in on the 22nd and we're at the money so far with the Jan $17.50 puts now $1.65 ($1,650) and the $15/17.50 bull call spread at $3.25/1.70 so net $1.55 ($3,875) is net $2,225 so it is up $2,150 (2,866%), which is a nice gain on cash and it still has $4,025 (180% left to gain if it holds $17.50).  See why I can't quit?  

    • Sell 10 THC Jan $20 puts for $2.50 ($2,500) 
    • Buy 20 THC Jan $15 calls for $6.50 ($13,000)
    • Sell 20 THC Jan $20 calls for $3.10 ($7,500) 

    That's net $3,000 on the $10,000 spread so $7,000 (233%) upside potential is not as exciting as our other trade ideas but THC is a lot more of a blue chip so possibly the least risky of the set.  Margin is also light, just $2,886 according to TOS in an ordinary margin account.

    These guys exploded up and now the Jan $20 puts are down to 0.60 ($600) and the $15/20 bull call spread is 130% in the money at $12.20/7.50 for net $4.70 ($9,400) out of a potential $5 ($10,000) so net net $8,600 is up $5,600 (187%) with $1,400 (25%) left to gain if you are into boring returns. 

    • Buy 50 SKT Jan $12.50 calls for $1.85 ($9,250) 
    • Sell 50 SKT Jan $14 calls for 0.95 ($4,750) 
    • Sell 20 SKT Jan $15 puts for $1.85 ($3,700) 

    That's net $800 on the $7,500 spread so $6,700 (837%) of upside potential if SKT is over $15 on Jan 17th.  Since we're selling puts over the current price, the ordinary margin is $5,741, so more than we'd like but, as noted on Aug 1st, I think SKT is ridiculously under-priced.  

    Retailers rallied this week on good news and SKT rents to retailers and the CEO has been buying shares at $14.50 and the company just beat expectations and raised guidance and is simply caught up in a rate-drive REIT sell-off that doesn't really apply to their type of business.  I think one more quarter is enough time for buyers to step in on this one.

    Gosh I love reading my old predictions when they are dead on the money!  The aggressive (at the time) $15 puts are down to 0.50 ($1,000) and the $12.50/14 bull call spread is now $4.70/2.20 and that's the full $2.50 ($12,500) already so no point in not cashing those.  That's net $11,500 for a $10,700 (1,337%) gain already and only $1,000 more to pick up, sadly – but now we have today's play to flip to!  

    So we're over our goal already and up $26,800 in just 2 months and that's 408% gained on our CASH!! and, as I said at the time, if we had put 10% of our portfolios into these trades and cashed 90% of the rest and that would still be a 40% boost over 2 months and I very much doubt we could have done better – even if we had kept all that money at risk.

    That's why I like cashing in once in a while, you can start with a fresh slate and pick up real bargains – rather than trying to keep milking your old cows….

  15. The Tesla Model 3 Survey

  16. CMG /Phil

    How you see a short strangle

    sell 10 March 20   $840 call

    sell 10  March 20  $600 put


    If CMG stays in that range ( Tipranks still has a $824 target ) provides a $ 40,000 premium., don´t know the margin in my account is high

  17. I love the timing of this dividend portfolio – I have been building one and only have it about 1/8th of the way filled out with a few REITs so far. Will definitely be following along closely.

  18. AT&T’s Giant Leap Forward

  19. T

    at yodi's suggestion I waited until after earnings. Now that we've seen them, is it still ok to put on the trade we discussed or wait till it settles back closer to $37?

  20. CMG/Advill – After TSLA's 30% move, I'm a bit gun-shy on those.  CMG just fell from $850 to $750 in a week so your premise that they won't move $100-150 in a month is a bit shaky and the problem is, if they do make a 20% move overnight (like TSLA did) the broker can raise the margin and force you to sell the losing side at the open – probably at the worst possible price.  I just don't think it's worth a big risk – though it's fun if you consider it to be fun money…

    Thanks Ati.  I think it's appropriate given the current market conditions.  We may keep going higher but, if we don't, these are stocks I don't mind being "stuck" with.

    • Stock waver after Reuters reports that a phase one U.S.-China trade pact may not be ready for signing at next month's APEC meeting in Chile.
    • The S&P 500, which climbed as much as 0.3% to fresh intra-day record of 3.047.87, rises 0.2%.
    • Nasdaq, down 0.3%, has been in the red all session.
    • The Dow, which briefly dipped into the red, edges up 0.1%.
    • Treasurys rise, with the 10-year yield falling a basis point to 1.838%.
    • Crude oil declines 0.5% to $55.54 per barrel.
    • Looking at S&P 500 industry sectors, health care (+1.4%) and energy (+0.9%) outpace the broader market, while communications services (-0.8%) and information technology (-0.4%) are the biggest decliners.
    • The Dollar Index falls 0.1% to 97.67
    • Treasury Secretary Steven Mnuchin says he's open to loosening financial crisis-era rules on liquidity to ease potential cash crunches in short-term lending markets, Bloomberg reports.
    • In an interview, Mnuchin said he had spoken with JPMorgan Chase (JPM +0.3%) CEO Jamie Dimon and other banks about ways to avoid liquidity problems.
    • “The banks have raised an issue around intra-day liquidity, and that is something that makes sense for regulators to look at,” Mnuchin said, adding that there may be a way around current rules that can increase intra-day liquidity without raising risks.
    • Last month, rates in short-term funding markets spiked as banks held onto their cash, rather than lend it to other financial firms, before a corporate tax deadline.
    • To calm the turmoil, the Fed has stepped in to inject liquidity on a daily basis.
    • Dimon has said that JPMorgan had the funds and was willing to use it to increase liquidity in the repo markets, but was held by by the tougher regulations that were implemented after the 2008 financial crisis.
    • Previously: Fed boosts overnight repo operations to at least $120B (Oct. 23)

    • Juul (JUULsent a number of top executives packing in a shakeup under the direction of new CEO K.C. Crosthwaite.
    • Chief Administrative Officer Ashley Gould, CFO Tim Danaher, Chief Marketing Officer Craig Brommers and VP of Advanced Technologies David Foster were all let go.
    • "As the vapor category undergoes a necessary reset, this reorganization will help JUUL Labs focus on reducing underage use, investing in scientific research, and creating new technologies while earning a license to operate in the U.S. and around the world," says Crosthwaite.
    • Related stock: Altria (NYSE:MO).
    • Gainers: Wins Finance Holdings (NASDAQ:WINS+49%. Synthesis Energy Systems (NASDAQ:SES+36%. Amkor Technology (NASDAQ:AMKR+30%. PG&E (NYSE:PCG+20%. Texas Roadhouse (NASDAQ:TXRH+19%. Talos Energy (NYSE:TALO+16%. Harmonic (NASDAQ:HLIT+15%. National Oilwell Varco (NYSE:NOV+15%. Mirati Therapeutics (NASDAQ:MRTX+15%. Varonis Systems (NASDAQ:VRNS+15%.
    • Losers: Grubhub (NYSE:GRUB-43%. U.S. Silica Holdings (NYSE:SLCA-36%. Diffusion Pharmaceuticals (NASDAQ:DFFN-33%. Diebold Nixdorf (NYSE:DBD-28%. LSB Industries (NYSE:LXU-21%. Peabody Energy (NYSE:BTU-19%. Beyond Meat (NASDAQ:BYND-19%. Owens-Illinois (NYSE:OI-18%. Safe-T Group (NASDAQ:SFET-17%. Orthofix Medical (NASDAQ:OFIX-16%.
    • U.S. Silica (SLCA -36.7%) shares plunge by more than a third after the company reported a larger than forecast Q3 loss and warning of further demand weakness in Q4.
    • SLCA expects Q4 frac sand volumes will decline at least 10% sequentially while prices likely will fall further.
    • SLCA's results and warning are dragging down other frac sand names: HCR -11.5%CVIA -10.6%FRAC -6%SND -5.8%CRR -3.7%.
    • "Energy markets deteriorated further and faster than expected during the quarter as E&P budget exhaustion slowed completion activity, resulting in lower demand and pricing pressure," CEO Bryan Shinn said during the company's earnings conference call.
    • Shinn said the company expects 2020 sales and profitability to be flat to up slightly Y/Y, and foresees a rebound in oil field completions by the middle of next year's Q1, as oil and gas producers reset their budgets.
    • SLCA said it now expects FY 2019 spending to finish lower than the $125M it had forecast earlier, and plans to spend $40M-$60M next year.
    • The spending forecast is the only "break in the clouds… but that's unlikely to save the stock today given the magnitude of the miss," says Tudor Pickering Holt analyst George O’Leary.
    • In a statement, the FDA says chronic shortages of certain medicines in the U.S. have not produced the expected responses from drugmakers that traditional economics predict, specifically, increasing prices to reflect a supply/demand imbalance aimed at achieving profitable production to satisfy said demand.
    • A just-released report from the Drug Shortages Task Force, formed to investigate the root causes of the problem, analyzed 163 drugs that went went into shortage from 2013 – 2017 and compared them to drugs that did not.
    • Shortage medicines, mostly sterile injectables, were more likely to be relatively low-priced and financially unattractive to produce. Instead of drug manufacturers stepping into the void with more expensive and profitable offerings to fill an acute market need, they have stayed away.
    • The taskforce cites three reasons: lack of incentives to produce less-profitable drugs, lack of recognition and reward for mature quality management systems and logistical and regulatory headwinds that make it difficult for the market to recover after a disruption.
    • It emphasizes that there is no single magic bullet to solve drug shortages, but offers recommendations on how to mitigate the problem, including a better understanding of the ramifications of shortages, improved transparency, creating a rating system that incentivizes and rewards the achievement of mature quality management systems (a higher bar than compliance with CGMPs) and contracts that provide manufacturers with sustainable risk-adjusted returns on their investments
    • More details have been revealed about Lockheed Martin's (LMT +0.6%) new $34B agreement with the Pentagon for 478 F-35s.
    • The deal includes 291 aircraft for the U.S. Services, 127 for F-35 International Partners, and 60 for F-35 Foreign Military Sales customers.
    • As mentioned earlier, the F-35A unit price, including aircraft and engine, is now below $80M in both Lot 13 and Lot 14, and represents an estimated overall 12.8% reduction from Lot 11 costs for the conventional landing variant, and an average of 12.7% savings across all three variants from Lot 11 to 14.

  21. Stockbern T As we see already today we have a small drop.

    Yes I am trading T but I am truely holding the stock at a purchase price of 21.40 and 30$. When the stock was trading at 30 to 32 I felt it was still a bargain, but even that Phil set up a very conservative play, I feel the stock is very much on top of the scale, so again I did not enter any new play, besides the once I have in my ports.

    I must admit I find it hard to find still good div. stocks at a more relative bargain price. Under todays market situation I am very conservative with entering new trades. But contrary to my feeling, in 2022 todays prices might look like bargains. Take it from here.

  22. AAPL/bite

    What happened to apple today?

    Overbought? Or

    Someone taking a huge bite off it? Profits? ‘ Morning show not what it was supposed to be?

  23. Maya – AAPL – current PE (21) is high for AAPL, which is typically 15-17. Before earnings I think many are just cautiously taking some profits.

  24. T/Stock – I don't think it's going much higher and a pullback would be more normal but depends on how happy the Fed makes people tomorrow.  I'm always conservative on T because it's been between $30 and $40 for 10 years so why pay $40?  For the purposes of the portfolio, I don't mind the play we have as it won't likely matter in the long run if we enter at $37 or $32 as it's just a matter of where we end up rolling short puts and calls to in 2022.

    And what Yodi said!

    AAPL/Maya – Just a bit of profit-taking ahead of earnings.  Also this:

    • Reuters viewed an EU document asking online sales companies if Apple (NASDAQ:AAPL) told the companies to use Pay over rival payment services.
    • The European Commission sent out a questionnaire in August and mentioned that Apple might have restricted online payments for purchases made via merchant apps and sites, violating EU antitrust rules.
    • The document asked the sellers if there was a contractual obligation to use one payment service or other conditions, such as integrating Apple Pay into the app or site.

    And what Deano said!

    Boy, you guys are getting good….

    • PG&E (PCG +27.1%) scores a strong rebound in heavy volume even as wildfires continue to rage in California, as the judge overseeing its bankruptcy case ordered the rival groups competing for control of the company into mediation.
    • PG&E also agrees to extend the deadline for wildfire victims to seek payment from the company, delivering something each side had been seeking in the bankruptcy.
    • Meanwhile, PG&E has started precautionary power shutoffs that may affect 596K northern California homes and business, and Edison International (EIX +1.1%) and Sempra Energy (SRE +0.1%) may cut power to 235K customers further south, as high winds leave nearly half of California's population facing critical fire weather conditions.
    • Societe Generale analyst Andrew Lim cut his recommendations on JPMorgan Chase (JPM -0.3%) and Bank of America (BAC +0.4%) to sell, noting that their shares have risen too much.
    • BofA exhibited "resilient" net interest margin and probably had the best Q3 among large-cap banks, but its post-earnings run-up went too far, he wrote.
    • The downgrades bring the two banks in line with Lim's ratings on other banks such as Citi, Goldman Sachs, and Morgan Stanley.
    • Lim adjusts his price target on BofA to $30 from $29.50;
    • While he acknowledges JPMorgan bank franchise's quality, it's valuation is now "too rich"; Lim boosts his price target for JPM to $113.
    • Lim's ratings contrast with Quant ratings of Very Bullish for BofA and Neutral for JPMorgan.
    • Volume on Beyond Meat (BYND -22.1%) is staggering a day after the company's earnings report dropped and with the IPO share lockup expired today.
    • More than 28M Beyond Meat shares have swapped hands already with an hour of trading still left to go. That tally reps nearly 50% of all BYND shares outstanding.
    • The Beyond meat IPO was priced at $25, leaving insiders and early buyers with large paper profits still.
    • Previously: Beyond Meat -16% over discounting, IPO lockup expiration worries (Oct. 29)

  25. Phil, what do you think of NOK at these levels? They have cancelled the dividend recently but still one of the few key patent holders for the upcoming roll-out of 5G globally and may perhaps get some of the Huawei market share (given Huawei's latest troubles)?

  26. AAPL/ 

    Yup, straight up from $142 last Dec to $249…in 9 months without so much as a sneeze.

  27. Now that the BA testimony is over, possibly Trade of the Year:

    • Buy 10 BA 2022 $330 calls for $69 ($69,000) 
    • Sell 10 BA 2022 $430 calls for $32 ($32,000)
    • Sell 5 BA 2022 $320 puts for $50 ($25,000) 

    That's net $12,000 on the $100,000 spread that's a little in the money to start.  Once BA is up at $400, we could even do some call selling to wash away the $12,000.  

    NOK/Alter – They've got a lot of issues but I think mostly it's re. the 5G rollout costs but clearly investors are just dumping them out so remind me tomorrow and I'll look closer as it could be a good pick-up.

  28. Yodi / Quality Div stocks. — I think one of the most underpriced Dividend stocks is MO ( Altria) another in this Section was PM . I got into it at $74 ( when it fell on merger earlier) and sold puts and calls and now have a net of of 73.  No reason for this not to get to a 88 sh price.   Altria (MO) have held this for years and am in this one at an adjusted 49 / SH…  Mo has much better CF and I do believe they will figure a way to fix JUUL, but even if they don't the will benefit from cross licensing with PM on iQOS.  MO should really be in the 60 / sh range…. 

  29. BA/Phil    on the BA play, did you mean sell 5 BA 2022 $320 puts ?  

  30. BA/Phil, Stockbern – Ditto, puts not calls, right?

    Sell 5 BA 2022 $320 calls for $50 ($25,000) ==> Sell 5 BA 2022 $320 PUTS for $50 ($25,000) ???

  31. batman re MO and PM 


    I agree that the MO and JUUL management will figure things out.  People had been vaping for years, then all of a sudden within a matter of months, there were numerous deaths or adverse reactions. Even lately, the story has died down.  I suspect there was some bad product out on the market, most likely not from JUUL.  Once a connection is made between the deaths, an outcome will be much clearer.  Meanwhile, MO looks undervalued. 

  32. "the story has died down"   Bad choice of word of words about news concerning death.  I apologize to anyone who may have been involved with this terrible problem.

  33. Stockbern / JUUL MO – I've reviewed a lot of research on this….  With the data provided on the CDC and other sites.  It appears that most of the deaths were related to vaping non tobacco chemicals ( CBD) although some were using tobacco.  In addition when I looked at it – no deaths had been attributed to JUUL products. most were Chinese knock off  or some other product.  - In some cases they looked like JUUL vaping sticks but were not.   In terms of folks that got sick… the data is similar, although there are more people that used tobacco only and got sick…  There were also some linked to JUUL but these were also using other devices as well ( not  to exclusively JUUL).    This may or may not be the death of JUUL, but I think they are now lookin to narrow the focus on smokers and cessation, and this is a huge opportunity if they can bet approved….. which has a timeout in 2020…. so things may get sticky if they can't get an extension 

  34. Global economic downturn is inevitable according to billionaires