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Unusual Options Activity: Fastenal (FAST)

Posted: 25 Jun 2019 03:00 AM PDT

Hardware and construction equipment company may be in for a big drop.

A large bet has been made that shares of Fastenal (FAST) will decline 25 percent by January 2021.

On Monday, over 2,000 contracts of the January 2021 $25 put options contracts had been traded, against an open interest of 142, representing a 14-fold surge in volume. This bet, with shares currently at $32.50, would need to see shares decline at least 25 percent before paying off.

With Fastenal's business in construction and manufacturing supplies and equipment, the company is a solid way to bet for global growth. The put option trade suggests an inexpensive way to bet on an economic decline.

Shares trade about in line with the market in terms of valuation at around 20 times forward earnings, but could sharply drop if economic indicators, particularly construction ones, drop.

Action to take: With the contracts trading around $1.75, and an expiration date about a year and a half away, this bet could be a good way to hedge your portfolio between now and then.

A long-dated put option like this is often a better way to trade than to short a company's stock directly, and at a fraction of the cost involved. Given how steep the stock would have to drop, however, traders may want to look at a higher strike price, such as the January 2021 $30 puts instead as a hedge trade more likely to pay off.

Insider Activity: NGM Biopharmaceuticals (NGM)

Posted: 25 Jun 2019 03:00 AM PDT

Another biopharma firm sees insider buying here.

Insiders in the pharma and biotech space continue to be bullish near current prices at many companies. The latest insider buys in the space occurred at NGM Biopharmaceuticals (NGM).

Column Group LP, already a major owner with more than a 10 percent stake, bought another 34,000 shares late last week. These buys were shown as going to director Peter Svennilson. Director David Goeddel also picked up shares late last week as well.

It's always refreshing to see large buys by insiders that already have a huge stake in a firm, rather than see insiders head for the hills and cash out shares at the earliest opportunity.

The company is a clinical stage biotech firm focused on developing transformative therapeutics for patients, based on scientific understanding of key biological pathways underlying cardio-metabolic, liver, oncologic, and ophthalmic diseases.

The company is working to become one of the most productive research and development firms in the biopharma industry, with multiple programs in clinical development.

Action to take: With shares just under $14.00, traders may want to take a look at shares. The company has a one-year target estimate by analysts of $25, but a more realistic price target may be the company's old 52-week high of $18.75 for about a 33 percent gain from here.

Sales Surge as McDonald’s Moves to Fresh Beef

Posted: 25 Jun 2019 03:00 AM PDT

Fast food giant has roaring success with new policy.

While many companies have been quick to embrace plant-based meat alternatives, McDonald's (MCD) has seen sales soar as it made a different move: from frozen beef to fresh beef.

One year ago, the company made the switch on its quarter pounder burger, and sales have risen by 30 percent. The company has even gained market share in the "informal eating out" category, a huge move for the fast food giant.

To undertake the move required getting suppliers on board with new packaging and refrigeration equipment, as well as extensive employee training in new food safety practices. Some franchisees balked at the costs, which they had to share, yet the results speak for themselves.

So far, McDonald's has only lightly moved into new meat alternatives, with a vegan burger offering in European markets, but speculation is rising that the company will continue to respond to consumer demand by adding such alternatives.

Action to take: McDonald's is a low volatility stock, and one that often fares well when the stock market is selling off. Shares rose in 2008 and in 2018 while the overall market trended down. The long history of dividend growth makes it an attractive long-term holding, at or under $205.

Markets Calm Despite Iran Sanctions, G20 Meeting This Week

Posted: 25 Jun 2019 03:00 AM PDT

New sanctions announced against Iranian regime Monday.

The stock market was largely calm on Monday, with stocks making an early push to hit new all-time highs. While the S&P 500 index has done so in recent days, the Dow Jones Index is within 100 points of its all-time high.

Traders were largely awaiting other events, including the G20 meeting later this week, where there may be some clarity on U.S./China trade relations. President Trump also unveiled sanctions against Iran.

Rather than follow up with threats of military retaliation, President Trump decided to hit Iran's supreme leader, Ayatollah Ali Khamennei and his office with specific sanctions designed to keep the Iranian government from accessing financial resources.

Secretary of State Michael Pompeo already reports that nearly 80 percent of Iran's economy will be impacted by sanctions. Further moves at this point are seen by some as purely symbolic. President Trump has stated that he is willing to negotiate with Iran, under the condition that they never acquire nuclear weapons.

Meanwhile, even with the stock market close to all-time highs, President Trump tweeted over the weekend that the markets could be "thousands of points higher, if the Fed had gotten it right," adding another criticism of the central bank's policy of raising interest rates from December 2015 to December 2018.
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