TradingTips.com

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Insider Activity: Associated Capital Group (AC)

Posted: 24 Jun 2019 03:00 AM PDT

Billionaire owner adds to beaten-down research firm.

Billionaire investor Mario Gabelli bought 3,544 shares of Associated Capital Group (AC) on June 20th. This doubles his personal share stake, but Gabelli is also Executive Chairman and owns more of the company through his Gabelli funds.

The New-York based company was founded in 1976 by Gabelli as an institutional research firm based on bottom-up research and generating market-beating returns.

Shares of the firm have traded between $32 and $46 in the past year, and currently trade around $35. Although the company has had negative earnings in recent quarters, it currently trades below book value.

The company also has no debt, and has nearly $400 million in cash, or nearly half the market cap at current prices. That makes it attractive as a deep value play, or for investors concerned about heavily-indebted companies right now.

Action to take: While many investors have concerns about financial companies late in the economic cycle, the strong balance sheet and relative valuation make this an interesting play in the broader financial sector.

Investors should consider following the billionaire investor Gabelli into shares of his own company at or near $35 per share. Shares pay about a 0.5 percent dividend yield here, and there are no options trades available on the niche company.

Stocks Flat as VP Comments on China Trade Issues

Posted: 24 Jun 2019 03:00 AM PDT

Vice President cites “positive signs” of progress on trade.

The stock market moved off its lows on Friday as more positive comments came out regarding trade.

Vice President Mike Pence stated that he will postpone a planned speech on China policy ahead of the meeting between Chinese President Xi Jinping and U.S. President Donald Trump.

Pence stated that there were "positive signs" of progress with China regarding issues on trade. The comments were enough to cause a brief pop in markets.

The two presidents will meet at the G20 meeting of world leaders, with the goal of working out a trade issue.

With global economic growth showing many signs of slowing, a resolution to trade issues could send growth rates rising—and give markets the push to move higher without the need for central bank accommodation.

While stocks rose from declines to trade relatively flat for the day, markets closed the week up thanks to a dovish meeting from the Federal Reserve on Wednesday.

The big winner for the week was oil. Prices continued rising on Friday amid U.S./Iran tensions, and reports that President Trump planned a retaliatory strike against the country but then cancelled it at the last minute.

Gold prices also had a good week, rallying to a five-year high in U.S. dollar terms on the likelihood of central bank rate cuts and rising geopolitical tension.

Unusual Options Activity: Barrick Gold (GOLD)

Posted: 24 Jun 2019 03:00 AM PDT

Traders bet on a gold decline.

After gold hit a 5-year high, one trader is betting on a pullback. On Friday, a bearish bet was made on Barrick Gold (GOLD).

On Friday, over 7,100 contracts of the November $14 put options contracts had been traded, against an open interest of 155, representing a 46-fold surge in volume. This bet, with shares currently at $15.40, would need to see shares decline at least 9 percent between now and November to move in-the-money.

Gold can be a volatile asset, and gold mining stocks tend to fare even worse. Many gold mining companies saw their shares drop 80-90 percent from their peak in 2011, when the metal itself only declined about 40 percent from its peak. So, even if gold prices stay flat from here, mining companies could see their shares decline.

Action to take: With the contracts trading around $0.58 this is an inexpensive bet on an asset that has plenty of volatility, and could provide investors a way to profit from a declining asset right now.

A bet like this can serve a good hedge for traders more inclined to be long the metal, if they use trades like this to hedge an existing gold position.

Overstock Shares Rally on Plan to Sell Retail Operations

Posted: 24 Jun 2019 03:00 AM PDT

Company to focus on blockchain technologies.

Shares of online retailer Overstock (OSTK) railed over 15 percent on Friday, following comments from CEO Patrick Byrne. Byrne has been looking to sell the company's core retail business, and indicated that two potential acquirers have stepped forward.

Byrne is looking to sell the company to focus on another trend: Cryptocurrency. Byrne sees retail as too competitive and challenging, but the rapid growth opportunities in blockchain technologies are wide open.

Founded in 1999, Overstock has struggled with profitability. Byrne expects the retail business to be worth around $100 million, and the division is on track to make $15-20 million this year.

With Byrne's obsession with blockchain, shares of Overstock have been volatile. Also, nearly two-thirds of the company's float are held by short-sellers, which makes the possibility of a short squeeze possible.

Action to take: Shares of overstock have long been a stealth play on the cryptocurrency place, as the retailer was one of the first to accept cryptos for payment, which are also kept on the books.

With the move to ditch the high-cost, low-margin online retail business, shares could end up being worth far more in the end as a result. This is an interesting alternative way to invest in the blockchain space, and the possibility of a short squeeze as short sellers cash out could be lucrative in the short-term.
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