Top Trades for Fri, 15 Nov 2019 15:25 – CHL

Another one for the Dividend Portfolio:

China Mobile is way too cheap to ignore at $39, which is $159Bn and they pay a lovely $1.95 dividend, so 5% at the moment.  Even when you divide by 7 yuan to the Dollar – it's a lovely $105Bn in Revenues and $15.5Bn in profits that are stable, not growing but the p/e is 10 and I don't mind paying that for stability.  Most likely, if not for the trade war – they'd be up 10% from here.  

Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
Revenue CNYm 630,177 651,509 668,335 708,421 740,514 736,819 734,414 746,430 767,760 +3.2%
Operating Profit CNYm 135,649 117,320 102,922 118,088 120,126 121,387 111,457     -2.2%
Net Profit CNYm 121,692 109,218 108,539 108,741 114,279 117,781 108,203 107,609 110,151 -0.7%
EPS Reported CNY 29.9 26.8 26.5 26.6 27.9 28.8 26.4     -0.8%
EPS Normalised CNY 30.3 27.5 25.0 27.8 30.3 29.0 26.8 26.3 26.9 -0.9%
EPS Growth % -6.2 -9.2 -9.0 +11.2 +8.7 -4.3 -13.5 -9.26 +2.24  
PE Ratio x           9.50 10.3 10.5 10.2  
PEG x           n/a n/a 4.67 5.29
Profitability

For our dividend plays, we value stability over growth and we've been loving CHL all decade when they hit the low $40s so no reason to pass this up and we will start with (they only have June contract lengths):

  • Buy 500 shares of CHL at $39.09 ($19,545) 
  • Sell 5 CHL June $37.50 calls for $3.20 ($1,600) 
  • Sell 5 CHL June $42.50 puts for $4.30 ($2,150) 

That's net $15,795 and we get called away at $18,750 for a $3,000 (19%) gain in 7 months, but we'll certainly look to roll and keep things going.  It's an aggressive put sale but net $38.20 is a price I don't mind paying to be in 2x so I'd rather do a smaller 500-share start with the aggressive puts than 1,000 shares selling the $37.50 puts for $1.40.  

Meanwhile, we should catch a $1 dividend in May (only twice a year, May/Sept) for another $500 (3%) so a very nice 7-month return of 22%.  Margin on the short puts is just $3,913.24 – so an efficient trade too! 





Top Trades for Fri, 08 Nov 2019 15:12 – MO

We love Altria long-term and they went on sale over the vaping debacle but now that is likely put to bed and we'd like to play:

 

 

 

 

MO – This is what I had been looking at at several sites…. this is actually good news for MO.   From WSJ

NEWS ALERT

 

Investigators Find Clue to Mysterious Vaping Injuries

Vitamin E oil was detected in all 29 samples taken from vaping patients tested by the Centers for Disease Control and Prevention, the federal agency said, a tantalizing clue in the investigation into the cause of the mysterious lung injuries.

Researchers found the oil in fluid taken from the lungs of vaping patients from 10 different states, the CDC said. No other suspicious substances were detected aside from Vitamin E oil, or acetate.

See More Coverage ›

MO/Batman – Damn, Ken (from New Age) told me that was what it was two month ago!   It's very bad for you if you heat it and inhale it.

Good reason to add MO to the Dividend Portfolio as they pay $3.36 so $46.20 is stupidly low for them.

  • Buy 500 MO at $46.20 ($23,100)
  • Sell 5 MO 2022 $47.50 calls at $5.50 ($2,750) 
  • Sell 5 MO 2022 $40 puts for $6.20 ($3,100)

That's net $17,250 and we get called away at $23,750 with a lovely $6,500 (37.7%) gain and then $3,360 in dividends over 2 years adds another 19.5% return which is great for such a conservative spread.  

In the STP, we can be a lot more aggressive.  Earnings should be early Feb and they are very likely to raise guidance (they massively wrote down JUUL this Q) so we can play for a spring pop:

  • Sell 5 MO March $47.50 puts for $4 ($2,000) 
  • Buy 15 MO March $42.50 calls for $4.70 ($7,050)
  • Sell 15 MO March $47.40 calls for $1.85 ($2,775)

That's net $2,275 on the $7,500 spread so $5,225 (229%) upside potential in just 4 months is worthy of the STP.  





Top Trades for Tue, 29 Oct 2019 10:22 – NLY

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


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Top Trades for Fri, 25 Oct 2019 11:46 – Dividend Portfolio

Dividends/Pat – Well that's great but please remind me over the weekend so I can do a proper job.  T is the most obvious to me as they pay $2.04 on the $37 price tag so more than 5%.  I don't particularly like them this high in the channel but it's a good, steady payer.  If you want to use options as well, my trade would be:

  • Buy 1,000 shares of T at $37 ($37,000) 
  • Sell 10 T 2022 $35 calls at $4.60 ($4,600)
  • Sell 10 T 2022 $30 puts for $2.95 ($2,950) 

That's net $29,450 and getting called away at $35 ($35,000) makes a nice $5,550 (18.8%) or, if assigned 1,000 more shares at $30, then average entry is $29.275 – which is where we like to buy T anyway.  That will pay $2,040/year for each 1,000-share block in dividends, another 13.8% over two years so a very nice, conservative trade for anyone to add to a portfolio but, again, I'd rather wait for a pullback and, if I REALLY wanted to jump in now, I'd just sell 5 2022 $33 puts for $4 ($2,000) and that's the same $2,000 you'd collect in dividends but a much lower net entry to the downside and, next January, I'd sell 5 more more for the next year's collections (if it hasn't come down low enough to buy and DD and cover).  

I like the REITs but I'm very alone there so it depends how charitable you really are as it's tricky to actually make money on them outside the dividends.

NLY, for example, is $8.83 and the 2022 $7 calls are $2 and the $10 puts are $2.60 (the $7 puts are 0.60 and not worth selling) so net $4.23 is great and they are paying $1 so massive dividend bang for the buck going out but, historically, they have been going down as much as they are paying out each quarter (faster even) so almost certainly you will be assigned 2x at $10 for $7.115 avg and very possible NLY will be around $6.50 unless conditions change with the Fed over…
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Top Trades for Tue, 22 Oct 2019 14:37 – IRBT

AAPL/Batman – No worries.  Keep in mind I'm still gun-shy and expecting a market correction, so I lean towards more protective plays. 

Speaking of corrections – so we now have one trade in our brand new Earnings Portfolio (see Morning Report above) and CMG is tonight but too dangerous for a small portfolio.  BA is tomorrow morning – that's scary enough!  

IRBT took a pounding this year, back to $56.  That's just $1.5Bn and they are good for $85M/yr in earnings – so 20x.  We used to like them but bailed at $90 – and then they went up to $130 before finally falling apart.  As with most stocks – if you wait long enough – they go on sale again.

IRBT spun out their military stuff so it's all consumer robots and they have a lot of competition now but business is still growing about 10% a year and would be doing better if not for trade war (most of their stuff is made in China and tariffed at 25%).  

They are still in the tariff storm so I don't expect great things here but long-term they should recover so I do like the 2022s and we can play the following:

  • Buy 10 IRBT 2022 $50 calls for $19 ($19,000)
  • Sell 10 IRBT 2022 $65 calls for $13 ($13,000)

That's a simply net $6,000 on the $15,000 spread so $9,000 (150%) of upside at $65 and we're $6,000 in the money to start.  If IRBT does well and pops, we're well on the way to a 150% gain in two years and, if it is flat or down, I have my eye on selling 5 of the 2022 $45 puts, now $10 ($5,000) to drop our net to $1,000 but 150% is very good money and $6,000 is not much to tie up and the margin on 5 short puts is $2,253 so we don't NEED to save the money so there's no sense taking a risk before we have more facts, is there?





Top Trades for Tue, 15 Oct 2019 11:04 – MJ

Good morning!

Had a nice breakfast meeting, doing a $5M round for New Age to build 3 more facilities.  

Talking to VC's at the moment but if any private investors want to go through our MJ Hedge Fund – contact Greg at Philstockworld dot com and we can discuss in detail.

Speaking of which, it is time to restart our investment in the MJ ETF as some of the companies are starting to report profits and that can change things very rapidly value-wise.  This was a big loser for us in the last cycle but our plan was to DD when we started seeing profits so, now that we have clean portfolios, now is a good time to take a new poke.

I'm still not ready to go to an LTP but, in the STP, let's start with the following:

  • Sell 10 MJ 2022 $20 puts for $5.40 ($5,400)
  • Buy 30 MJ 2022 $15 calls for $7 ($21,000) 
  • Sell 30 MJ 2022 $30 calls for $2.20 ($6,600)
  • Sell 5 MJ Jan $20 calls for $1.65 ($825) 

That's net $8,175 on the $45,000 spread so there's $36,825 (450%) of upside potential at $30 but, even if we don't get to $30, we have  829 days to sell and we just sold 94 days for about 10% of our cost on just a 1/6th cover.  That's what I always liked about this ETF but we were too enthusiastic and failed to sell short-term calls, which is what really hurt us last cycle.  

See, that's already two trades for our new cycle – at this pace we'll be fully invested by March!  cheeky

 





Top Trades for Mon, 07 Oct 2019 12:11 – Coffee Futures (/KC) and SPWR

/KC back to $97, always fun to buy down there with a stop below $95.

  • China has added more than 100 metric tons of gold to its reserves since it resumed buying in December, as the country continues to buy gold to diversify its reserve assets away from the dollar amid strained relations with the U.S.
  • September's increase of 5.9 mt by the People's Bank of China follows the addition of 99.8 mt through August.
  • Russia also has been adding substantial quantities of bullion; central banks worldwide have snapped up more than 450 mt during the first eight months of 2019, helping push total gold demand to a three-year high, the World Gold Council has said.
  • Central banks have been major buyers of gold and likely will continue to do so as protectionist policies and geopolitical concerns add to demand, says Suki Cooper, precious metals analyst at Standard Chartered Bank.
  • December Comex gold edges lower, -0.3% to $1,509/oz.


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Top Trades for Thu, 03 Oct 2019 11:39 – LABU

You can sell the TZA 2022 $60 calls for $14 and the TNA 2022 $60 calls for $12 (shows you which way sentiment is running) so that's $26 collected against the risk of one of them hitting $90, where you start to get in trouble.  If you could ride out a spike against you – it's a very high-probability play!  

LABU/DC – I'd make it an income play:

  • Sell 5 LABU 2022 $25 puts for $11 ($5,500)
  • Buy 15 LABU 2022 $30 calls for $13 ($19,500)
  • Sell 15 LABU 2022 $45 calls for $9 ($13,500) 
  • Sell 3 LABU Jan $34.87 calls for $3.80 ($1,140) 

That's a net $640 credit on the $22,500 spread and you should be able to pick up at least $1,000 a quarter for 8 quarters so $8,000 even if you don't end up making money on the long spread.  

That's good enough for a Top Trade!  





Top Trades for Fri, 27 Sep 2019 13:22 – TXN and TCNNF

I was on Benzinga's pre-market show this morning.

Here's the Benzinga link:

I gave them a very nice bottom call in /YG, but they stepped all over it while I was talking.  

Also talked about yesterday's TXN short play, which I like even more after the way MU was treated this morning.

September 26th, 2019 at 3:50 pm | (Unlocked) | Permalink 

P/E for TXN is 23.5 at $120Bn at $128.50 – that's historically high for them.  They are pegged to make less money than they did last year but they are up 40% and earnings expectations for Q3 ($1.42) haven't come down since last Q even though chip prices have crashed.   Of course TI sold most of their DRAM biz to MU ages ago and 75% of their business is analog semiconductors now but revenues were down 9% last Q and will be down 9% (from last year) again this Q with no end in sight so $130 is silly for them.

As a short on TXN, I'd go for:

  • Sell 3 TXN Jan $130 calls for $6.25 ($1,875) 
  • Buy


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Top Trades for Thu, 19 Sep 2019 11:19 – MDR and CASH!!! Call

 

I'm never going to get to them but I want to be clear that I want to also cash out the LTP and STP.  I will do a review and note the "keepers" but, at the moment, the LTP is $1,729,833 (up 246%) and the STP is at $886,611 (up 786%) and when they were at $2.2M I was going to cash out ahead of the 7/31 meeting and quickly regretted it as we dropped close to $2M, now we're at $2.6M and MAYBE we get to $3M or maybe we drop back to $2M but I KNOW I can easily make $400,000 with $2.6M in cash to get to $3M but it will be a lot harder to have to start again with $2M and get to $3M – probably a year harder and there's that time thing again.  

So, in conclusion – it's simply not worth the risk! 

 

MDR/DC – Fortunately, we got out of ours a long time ago as we never wanted them, we just liked CBI, who they merged with.  Needless to say, the merger has not gone well (which is why we didn't want to ride it out) and now they are calling in restructuring experts.  MDR says it "is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet."   You can take them at their word (as no one is) or you can imagine this is a sort of cover-up for their emergency measures to stave off some sort of disaster that's looming.

I do watch them (because they took away my CBI) and last year they took a $2.7Bn hit on write-offs and such and this year they lost about $190M in the first two Qs and it's doubtful they turn that around by the end of the year but they have $455M in cash and I bet they end up down less than $100M for the year with…
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Zero Hedge

Trump's $50 Billion Farm Deal Is Fantasy After Trade War Market Shifts

Courtesy of ZeroHedge View original post here.

Industry insiders have told South China Morning Post (SCMP) that President Trump's alleged $50 billion agriculture deal with China is merely a fantasy, used to stimulate his Farm Belt supporters ahead of an election year, and even used as a communication tool to drive the stock market to new highs. Still, the likelihood of it actually happening is very low.

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What is an oligarch?

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Why telling people with diabetes to use Walmart insulin can be dangerous advice

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Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

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Glass House Group Appoints Graham Farrar As President

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Glass House Group, a California-based cannabis and hemp company, earlier this week appointed Graham Farrar as president.

In his new role, Graham will oversee the company’s short and long-term business strategies, budgets and operations, and report up to Glass House Group CEO Kyle Kazan.

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Dow Jones cycle update and are we there yet?

Courtesy of Read the Ticker

Today the Dow and the SP500 are making new all time highs. However all long and strong bull markets end on a new all time high. Today no one knows how many new all time highs are to go, maybe 1 or 100+ more to go, who knows! So are we there yet?

readtheticker.com combine market tools from Richard Wyckoff, Jim Hurst and William Gann to understand and forecast price action. In concept terms (in order), demand and supply, market cycles, and time to price analysis. 

Cycle are excellent to understand the wider picture, after all markets do not move in a straight line and bear markets do follow bull markets. 



CHART 1: The Dow Jones Industrial average with the 900 period cycle.

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As part of Coindesk’s popup podcast series centered around today’s Invest conference, I answered a few questions for Nolan Bauerly about Bitcoin from a wealth management perspective. I decided in December of 2017 that investing directly into crypto currencies was unnecessary and not a good use of a portfolio’s allocation slots. I remain in this posture today but I am openminded about how this may change in the future.

You can listen to this short exchange below:

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If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...



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Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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